Last updated: September 10. 2013 11:23PM - 655 Views
VICTOR REKLAITIS MarketWatch



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NEW YORK — The Dow Jones industrial average will have three new members in Goldman Sachs Group Inc., Visa Inc. and Nike Inc., while Bank of America Corp., Hewlett-Packard Co. and Alcoa Inc. have been shown the door.


S&P Dow Jones Indices announced the shakeup before the open on Tuesday, saying it represents the first “three-for-three” change to the blue-chip index since April 2004.


Goldman will replace Bank of America, Visa will replace HP, and Nike will replace Alcoa.


The adjustment to the Dow industrials will happen after the close of trading Sept. 20, and it will be effective at the open of trading the following Monday.


S&P Dow Jones Indices, the company behind the index, said it made the change because of the low stock prices of the three departing components, and because the company’s index committee wants to diversify the sector and industry group representation.


The three stocks on the way out are the Dow’s three lowest-priced components, said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. That means they have relatively little impact on the Dow, since it’s a price-weighted index unlike other popular benchmarks, such as the Standard & Poor’s 500 index, that are weighted by market capitalization.


Blitzer said additions and removals to the index shouldn’t be seen as investment recommendations. “There’s no intention to pick winners,” he said during a conference call Tuesday after the shakeup was announced.


With Goldman supplanting Bank of America, the blue-chip index is exchanging one financial firm for another. S&P Dow Jones Indices views swapping out ailing PC maker HP for credit-card giant Visa as exchanging one information-technology company for another. It described Visa as a firm from the IT sector and called it a “payments technology company that engages in the operation of a retail-electronic-payments network worldwide.”


But the Alcoa-Nike move will result in a materials name giving way to a consumer-discretionary company. Blitzer said picking Nike provided a way to diversify to consumer discretionary, and he also emphasized Nike’s size and reach. “It’s a large company. It’s significant. Among consumer companies, I think it’s well-known. It’s global,” he said.


S&P Dow Jones Indices said the changes won’t cause any disruption in the level of the index, because the divisor used to calculate the Dow from its components’ prices on their respective home exchanges will be changed after the close on Sept. 20.


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