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Amazon would need a big enough division to enter the Dow Average

(Bloomberg) – It’s a speculation that often explodes around earnings season: it would be a good time for Amazon.com Inc. to split its shares, as a prelude to entering the Dow Jones Industrial Average. At over $ 3,450, the online retailer’s shares are trading far too high to place in the Dow Jones, where the stock’s price is what determines its weighting. Even a 10-to-1 split, bringing the stock to around $ 345, wouldn’t make it a shoo-in. “The main problem with the Dow is that it’s weighted by price, so price matters – not market capitalization,” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance. The Dow is a 124-year-old market gauge made up of 30 blue chip companies that span all industries except transportation and utilities. The inclusion – or ejection – of the measure tends to cause a stir: in August, Exxon Mobil Corp., Pfizer Inc. and Raytheon Technologies Corp. were kicked off the gauge, making way for Salesforce.com Inc., Amgen Inc.. and Honeywell International Inc. A 10-to-1 split would make Amazon.com the third largest weighting in the Dow, behind UnitedHealth Group Inc. with a price tag of nearly $ 400 and Goldman Sachs Group Inc., recently trading near of $ 350. Lerner, chief market strategist at Truist Advisory Services, says the potential inclusion of Amazon.com would be more about prestige than anything else, given that the Dow is one of the most commonly cited indexes. shows you that you are a leading company on the world stage and a leader in your industry, ”he said, adding that a split could make his shares more accessible to retail investors. split the price between $ 100 and $ 300, this could make the stock more appealing to mom-and-pop investors. This is because retail investors “care about the actual dollar share price”, while institutional investors “might not care.” Certainly, large stock splits are not uncommon when it comes to companies seeking a place in the Dow Jones. . Apple Inc., for its part, announced that it was dividing its shares 7 to 1 in April 2014, almost 11 months before it was added. The economic benefit of stock splits is almost nonexistent. But for retail investors who tend to shy away from high-priced stocks, a stock that suddenly becomes cheaper in terms of face value tends to generate interest, even if only temporarily. This may be one of the reasons why stocks have historically outperformed the market right after a split announcement. and the effective date, with a success rate of 68%. But inclusion in the index “hasn’t seemed like a priority for some of the tech giants,” said Giorgio Caputo, senior fund manager at JO Hambro Capital Management. “They certainly don’t lack index representation at this point.” The sector accounts for 26.9% of the S&P 500, the largest weight in the index. Amazon.com’s shares were little changed on Thursday as the e-commerce firm neared record highs ahead of its results, which are expected to be released after the closing of the market. Some investors believe the company could take this as an opportunity to announce a stock split, dividend or buyback program. Radio. For more articles like this please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP



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