How now Dow cow?

The Dow Jones Industrial Average did a little spring cleaning yesterday, replacing a few of its market laggards. It was long overdue. There were too many low-priced stocks taking up space, and way too many viable candidates waiting to get in.

Unfortunately, the Dow blew it. It could have rolled with the times, adding several relevant bellwethers. Instead, it played it safe and stodgy, the way it always has.

So far this year, the Dow hasn't been much of a market proxy. It closed yesterday with a slight loss for 2009, just as the Nasdaq Composite and the S&P 500 are sporting year-to-date gains of 16% and 4%, respectively.

This isn't a race. Investors aren't supposed to bet on which index will take home the blue ribbon in any given year. However, the Dow's reliance on the growth stocks of yesteryear and an out-of-touch price-weighted formula are finally catching up with the index. It may have correlated well with the S&P 500 in the past, but its shortcomings are finally catching up in recent runs.

If I ran the Dow
The Dow can use a makeover, even after yesterday's additions. It didn't go far enough. It didn't go deep enough. There are still way too many influential companies that belong in a gauge that is still widely quoted by the financial media.

Let me go over the five stocks that I feel were robbed by not being tapped into the index.

The world's leading search engine commands a healthier market cap than all but a third of the Dow's current components. It continues to grow, even as most ad-based companies are struggling.

I have a theory. I suggest that the only reason that Google hasn't been incorporated into the Dow 30 is because of its share price. How discriminatory is that?

Before you suggest I'm crazy, let me show you the math. The closing prices of the 30 current Dow stocks add up to $1,095. With Google at $426.56, the search engine would account for 28% of the index. It just goes to show how ridiculous the Dow's price-weighted model is. If Google were to declare a 10-to-1 stock split -- or even a 5-to-1 stock split, I can almost guarantee that it would be the next component added to the Dow. If I'm right, it's a shame.

How crazy is it that Apple isn't in the Dow? CNBC ran an online poll last week, asking readers to vote for the likely successor to General Motors (NYSE:GM) on the iconic index? The early audience favorite was Apple.

It makes sense. Apple has gone from a niche computing specialist at the beginning of the decade to the market leader in portable media players and digital music. It is also a fast-growing play in wireless. Diversified product lines across computing, entertainment, and telecommunications make it a natural Wall Street tastemaker.

The enterprise software leader is another worthy candidate that has failed to make the cut. More than just another tech stock, Larry Ellison's company is the perfect pulse of corporate IT spending.

One also can't ignore Oracle's voracious appetite. The company is a serial acquirer. If it sniffs out a threat, a potential growth opportunity, or a missing puzzle piece, Ellison will storm right in with checkbook in hand. In other words, Oracle is a survivor.

There is already one pop star in the Dow, but what's wrong with having two soft-drink makers in the Dow? PepsiCo is also a giant in salty snacks through Frito-Lay, a breakfast titan with Quaker Oats, and a heavy hitter in other liquid refreshments through Gatorade and Tropicana.

No offense to current Dow component Kraft Foods, but PepsiCo commands twice the market cap of the Cheez Whiz maker. If it wants to be truly representative, it needs to make sure it's tracking the true behemoths of foodstuffs.

Visa (NYSE:V)
Again, this is another case where the Dow has a reasonable proxy in American Express (NYSE:AXP), but it's no Visa. Visa commands the greatest market capitalization of the three major credit card companies. As a plastic marketer, Visa was also able to skirt most of the problems that tripped up issuing banks that overextended their available credit.

I'm not suggesting that Amex be swapped out for Visa, but surely there must be an aluminum company or a tractor manufacturer that is longing to check out.

Be relevant or go home
So what's it going to be, Dow 30? Are you going to do away with the insane price-weighted model so Google can get past the velvet rope that it should have cleared years ago? Is the solution to possibly expand into 40 or perhaps even 50 components to make sure you don't miss out on the market's true market shakers?

The clock is ticking. The way companies like Google, Apple, and Visa were robbed, the Dow should probably be arrested.

Other ways to get down with the Dow:

Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor recommendation. American Express is a Motley Fool Inside Value recommendation. PepsiCo is a Motley Fool Income Investor pick. Kraft is a former pick of Income Investor. The Fool owns shares of American Express. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz wonders if companies with triple-digit share prices will consider stock splits just to break into the Dow. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy. Moo.