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What If Apple Ran the Dow?

The Dow Jones Industrial Average  (DJINDICES: ^DJI  ) is up by a modest 13 points as of 12:40 p.m. EST. Boeing  (NYSE: BA  ) 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  (NYSE: 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  (NASDAQ: AAPL  ) 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  (NYSE: AA  ) 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:

Source: The Wall Street Journal.

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.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been rewarded with gains of more than 1,000%. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons both to buy and to sell Apple, as well as what opportunities remain for the company (and your portfolio) going forward. To get instant access to his latest thoughts on Apple, simply click here now.

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  • Report this Comment On January 14, 2013, at 2:29 PM, jaybee58 wrote:

    To be fair, you must also show how AAPL's rise from $36 to $705 would have impacted the market!

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