The Dow Jones Industrial Average -- the iconic 30-company stock average that is the oldest index still in use today -- is getting an adjustment. In a recent note, the division of S&P Global (NYSE:SPGI) responsible for the index composition said Salesforce (NYSE:CRM) is replacing ExxonMobil (NYSE:XOM), Amgen (NASDAQ:AMGN) is replacing Pfizer (NYSE:PFE), and Honeywell (NASDAQ:HON) is replacing Raytheon Technologies (NYSE:RTX), effective August 31.  

The stock index constituent swap-outs were prompted by Apple's recently announced 4-for-1 stock split, since the Dow Jones Average is a stock price-weighted index (versus a company market cap weighted index like the S&P 500). But S&P Dow Jones also said the move better reflects the current state of the U.S. economy. That said, here's what investors should consider regarding Salesforce, Amgen, and Honeywell before buying their respective stocks.

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Digital data: The new commodity that moves the economy

Nicholas Rossolillo (Salesforce): At first glance, ExxonMobil being supplanted by a tech firm is a head scratcher. After all, energy is a totally different game than the customer relationship management (CRM) software Salesforce got its start developing and is still best-known for.

However, even before the COVID-19 pandemic and ensuing lockdown started rendering large swathes of the economy redundant, the digital world was growing fast and was supplanting less profitable legacy business operations. Energy will without a doubt continue to be important (and gets representation in the Dow 30 via Chevron (NYSE:CVX)), but data is the new basic commodity of the ever-important digital economy.  

I think axing Exxon in lieu of Salesforce makes more sense than many will give credence. CRM software and customer satisfaction is at the crux of everything Salesforce does, but this company has grown out of its ability to help its users put data to effective use. And its CRM bread-and-butter has been leveraged into new fast-growing software segments like marketing and commerce and data integration and visualization services. Put simply, while digital data and energy are not an apples-to-apples comparison, both are basic commodities all organizations need to complete basic operations in today's age -- and Salesforce is increasingly at the heart of many companies' efforts to make better use of IT infrastructure.  

Salesforce is on track to reach nearly $21 billion in revenue for the first time this year. If it pulls that off, that will represent year-over-year growth of over 20%. In the midst of a recession, I say those are pretty good numbers, especially for such a large business. For investors that think another decade of digital transformation lies ahead, Salesforce stock deserves to be a core portfolio holding. https://investor.salesforce.com/files/doc_financials/2021/q2/CRM-Q2-FY21-Earnings-Press-Release-w-financials.pdf

The Dow's first biotech

Keith Speights (Amgen): Why is the Dow Jones index adding Amgen, booting Pfizer (NYSE:PFE) out in the process? The Dow wanted more diversity in its member companies. Pfizer, along with remaining Dow index members Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK), are big pharma companies. Amgen ranks as the largest biotech stock on the market, while Pfizer is smaller than J&J and Merck and will soon lag even farther behind with the upcoming merger of its Upjohn unit with Mylan (NASDAQ:MYL).

Amgen has more in common with the big pharma companies on the Dow than it does with most biotechs, though. It claims seven blockbuster drugs on the market. The company generates tremendous revenue and huge profits (over $7.8 billion last year). Unlike most biotechs but like most big pharma companies, Amgen even pays a dividend.

However, Amgen has something else in common with a lot of big pharma companies that isn't so great: relatively sluggish growth. The biotech's sales increased less than 6% year over year in the second quarter of 2020. Sure, the COVID-19 pandemic hurt. However, sales for several of Amgen's top drugs were already falling before the coronavirus outbreak in the face of biosimilar and generic competition.

Still, Amgen claims newer products that could help drive its shares (and the Dow Jones index) higher in the future. Otezla, an autoimmune disease drug acquired from Celgene last year, has already become an important player in Amgen's lineup. Migraine drug Aimovig and osteoporosis drug Evenity are gaining solid momentum. Sales of Amgen's biosimilars are also soaring. 

The Dow definitely could have added a biotech with better growth prospects than Amgen. But there's no question that Amgen was a good choice if the index wanted to include a biotech that fits in well with its other drug stocks.

An industrial/technology hybrid with room to run

Daniel Foelber (Honeywell International): In 2008, Honeywell was removed from the DJIA  for having too few sales and not earning enough money. Since then, Honeywell has risen to become the third-largest U.S. industrial by market capitalization, outperforming the market and other industrials by an impressive margin.

HON Chart

HON data by YCharts

Honeywell's replacement of Raytheon Technologies is a natural fit for an index that wants to "better reflect the American economy."  From thermostats and fans to 3D-printed engine components for commercial aircraft, Honeywell has a leading position across several industries that shape the modern economy.

Honeywell's success over the past 12 years is a testament to gaining market share across its core industries, but its future success will likely stem from blending the physical world with the digital world. This is where Honeywell really shines.

The company has been developing a series of solutions that increase performance through the collection and use of data and automated processing, potentially transforming Honeywell from an industrial company to an operational technology (OT) and an industrial internet of things (IIoT) company. Put another away, instead of selling thermostats, the company will sell products like Honeywell Forge Energy Optimization, an autonomous solution for buildings that uses machine learning to reduce energy consumption. 

In addition to Honeywell's impressive portfolio, the company will enter the DJIA with arguably the best balance sheet of any industrial in the index. Honeywell's 2.3% dividend yield is the cherry on top of a company with a rock-solid foundation and plenty of future upside.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.