REMODELING THE DOW
REMODELING THE DOW
It didn't suit the blue-chip image of the Dow Jones industrial average to continue to include the stocks of bankrupt General Motors and ward-of-the-state Citigroup. So Dow owner News Corp. said on June 1 that it's casting them out of the list of 30 in favor of Cisco Systems and Travelers. Cisco, a tech stalwart, has an A+ credit rating. Travelers, a property and casualty insurance company that was once part of Citi, kept its assets safe in the financial crisis and is still rated A-. Cisco trades around 20 and Travelers at 40-plus, compared with less than 4 for the discards. The higher prices will tend to make the Dow move more erratically because of the way the average is calculated. But that's a minor blemish compared with the better reputations of the new stocks.
Copyright 2009  BusinessWeek
