On May 26th 1896, Charles Dow, then editor of the Wall Street Journal, constructed the first known index of US industrial stocks, which he named the Dow Jones Industrial Average (DJIA). The Index originally comprised just 12 industrial companies spanning sectors from sugar, tobacco, oil and gas to electricity, coal, iron, leather and rubber. The number of components in the DJIA later increased from 12 to 30 and in recent decades, the number of non-industrial stocks in the Index has risen sharply. Today, the DJIA includes many technology, financial and consumer discretionary brand names, while old economy industrial names are few and far between. Until now, only one company has lasted as a member of the DJIA since its (near) inception. That company is General Electric, added to the Index in 1907. However, the powers that be have now decided to remove GE, the last remaining link to Charles Dow, from the Index following its recent -58% share price collapse. It is the end of an era.
GE will be replaced by.... a chemist, Walgreens, hardly a leader of the industrial world but times they are a changing. Time has caught up with GE, a serial acquirer of businesses over the years to create the perception of continuous earnings growth. Today, GE is a minnow with a market cap of just $120BN, one eighth the size of Apple.
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