GE Just Got Kicked Off The Dow, But It’s Not the Only Big Company to Lose a Spot on the Index
Iconic American company GE has been booted from the Dow Jones Industrial Average. General Electric, which produces everything from lightbulbs and consumer appliances to airplane engines, will be replaced by Walgreens Boots Alliance, S&P Dow Jones Indices announced on June 19. GE first joined the Dow in 1896 and has been a continuous member since 1907.
Dow Jones made the decision to dump GE in favor of Walgreens because the latter company will make the index “more representative of the consumer and health care sectors of the U.S. economy,” David Blitzer, the managing director and chairman of the index committee at S&P Dow Jones Indices said in a statement.
The Dow Jones Industrial Average is a price-weighted index made up of 30 different stocks that are traded on Nasdaq and the New York Stock Exchange. The stocks selected are “designed to serve as a proxy for the broader U.S. economy,” according to Investopedia. As a result, the companies included in the index sometimes change to reflect broader changes in the economy. This most recent “change to the DJIA will make the index a better measure of the economy and the stock market,” Blitzer explained.
In 2017, GE was the worst-performing stock on the Dow, CNN reported. People have been predicting for months that the company’s days on the prominent index were numbered. The company has been selling off parts of its business and is trying to find a company to buy its lightbulb division. Still, the news that GE (which has more than 300,000 employees worldwide) has fallen out of favor with the Dow is jarring, especially for those who remember when it was one of America’s elite companies.
However, being removed from the Dow isn’t necessarily a sign of doom for a corporation. Plenty of well-known companies have been removed from the index over the years. These include:
- AT&T: Removed in March 2015 after nearly a century on the index. It was replaced by Apple.
- Alcoa, Bank of America, Hewlett-Packard: Removed in September 2013 and replaced by Goldman Sachs, Nike, and Visa.
- General Motors: Removed in 2009 and replaced by Cisco.
- AIG: Replaced in 2008 by Kraft Foods.
- Kraft Foods: In 2012, four years after replacing AIG on the Dow, Kraft was kicked off in favor of UnitedHealth.
In the 12 months after being removed from the Dow in 2013, Alcoa gained 116%, Bank of America gained 13%, and HP gained 67%, according to Barron’s. “Maybe getting kicked out is just what GE needs,” the business publication speculated in January 2018.
Of course, some companies that leave the Dow never regain their footing as blue-chip stocks. Bethlehem Steel, which was once one the largest producers of steel in the U.S., left the Dow in 1997 after nearly 70 years on the index. It declared bankruptcy in 2001 and sold off its remaining assets in 2003, the victim of a changing economy. Sears also left the DJIA in 1997. While that company is still in business, it’s been struggling and is closing stores right and left. Kodak was removed from the Dow in 2004. It later filed for bankruptcy as it struggled to adapt from traditional film photography to digital.
Right now, it’s not clear yet what the future holds for GE. The company’s share price dipped after the announcement, but only time will tell if it can find its footing again.