This is what the Dow would have looked like if Apple joined in 2008

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This is what the Dow would look like if Apple had joined in 2008. Photo: Bloomberg
This is what the Dow would look like if Apple had joined in 2008. Photo: Bloomberg

The Dow Jones Industrial Average measures the strength of American industry based upon how 30 large, publicly owned companies in the United States have traded in the stock markets. Companies come in and out the Dow periodically, according to whether their fortunes are waxing or waning.

When Apple joins the Dow Jones Industrial Average next week — replacing AT&T, which has been on the index since 1916 — the Dow will be at a historic high (assuming nothing catastrophic happens between now and then). But if Apple had joined the Dow in 2008, that value would be even more historic. It would have added more than 4,300 points to the Dow.

Bloomberg Business financial writer Inyoung Hwang imagines an alternate history in which Apple was added to the Dow Jones in February 2008 instead of Bank of America.

Hwang explains:

Aided by a pre-split Apple, whose stock exceeded $700 by 2012, the 30-company gauge would’ve reached 21,944.66 on Tuesday — almost 4,300 points above its actual level. Adding the iPhone maker to the index amplifies the return not only because Apple rose sevenfold since 2008, but because its stock didn’t split until June 2014, further boosting the price-weighted Dow.

“Apple was a good contender back then, but it would have overwhelmed the Dow,” said Robert Pavlik, who helps oversee $9 billion as chief investment strategist at Boston Private Wealth. “The shares have been on fire since it came out with the iPhone and iPad.”

It’s an interesting thought exercise, because the Dow Jones Industrial Average is supposed to represent the strength of American industry in general … but Apple’s success is extraordinary, and would have actually artificially inflated the Dow in many ways. Hwang notes, though, that if Apple had joined the Dow earlier, it may have split its shares even earlier.

Either way, it’s hopeful stuff. Apple’s soon to be an official member of the Dow Jones Industrial Average. Anyone care to predict how long it will be there?

Source: Bloomberg

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