What If Apple Ran the Dow?
Jan 14th 2013 2:00PM
Updated Jan 14th 2013 2:55PM
The Dow Jones Industrial Average is up by a modest 13 points as of 12:40 p.m. EST. Boeing jumped 1.2% as memories of last week's Dreamliner fires started to fade, adding an index-leading seven points to the Dow. But IBM always casts a big, blue shadow over the index, and the stock was just downgraded by influential megabank JPMorgan. IBM's 0.9% drop slashed 13 points off the Dow.
That's all fine and dandy, but the biggest news in Monday's market came from a company that isn't part of the Dow: Apple plunged 3.4% after two independent reports showed Cupertino cutting parts orders for the iPhone 5 in the current quarter. The price drop destroyed about $14 billion of Apple's total market value. To put that number into perspective, consider that aluminum producer Alcoa is worth just $10 billion.
If Apple itself had been invited to the ultra-exclusive Dow club, today's plunge would have caused a massive 127-point drop. With a share price of roughly $500, Apple would instantly become the most influential stock on the Dow, far ahead of IBM at $200 and a plethora of tickers below the $100 mark.
The company isn't likely to join the Dow anytime soon, given the outlandish influence its elephantine share price would hold. I'm big on keeping things in perspective today:
IBM may be the kingpin of the Dow today, controlling 11% of the index's price swings, but Apple would simply point and laugh. Imagine Cupertino replacing minuscule Alcoa tomorrow; the newcomer would rule the Dow with a 22.4% value stake. Replacing IBM instead in a wholesale change of the big-ticket guard, Apple would command 24.4%.
This is why Apple will never join the Dow, short of a stock split or a substantial price drop. On a day like this, investors can thank their lucky stars for this quirk of the blue-chip index.
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The article What If Apple Ran the Dow? originally appeared on Fool.com.Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders' bio and holdings or follow him on Twitter and Google+. The Motley Fool owns shares of Apple and International Business Machines. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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