This article was updated on April 6, , and originally published on November 21, Dating to , it's the second-oldest active market index, after sibling Dow Jones Transportation Average , and it's the most widely covered.
Today, there are 30 stocks that make up the Dow Jones Industrial Average. The total has grown over time: Initially, the index had just 12 components, representing the major public industrial companies of the day.
Today, the 30 companies in the index cover all of the major sectors of the U. One thing to remember: Despite its name, the DJIA hasn't been limited to traditional "industrial" companies for many years. All of the companies in the DJIA are considered major players in their respective industries. Most are household names. Most of the indices familiar to investors are "market-capitalization-weighted", meaning that the companies with higher valuations have more influence on the index's movements.
The Dow Jones Industrial Average is very different. The DJIA is a "price-weighted" index, meaning that the companies with higher stock prices have greater weight in the index's calculation. But the DJIA isn't just the sum of the stock prices of the 30 stocks: It's a scaled average, meaning that the index's value is adjusted to account for historic stock splits, dividends, and other changes to the individual stocks over time. At the same time, the Street's consensus recommendation has slipped to Hold.
Not that the bull case has completely collapsed. Over at Deutsche Bank, analyst David Begleiter chimes in with a Hold of his own, saying that the company's strong second-quarter earnings were "as good as it gets for Dow. As for the bullish side of the trade, CFRA Research's Richard Wolfe says Dow's "diverse portfolio and end-market exposure amid economic recovery, continued debt reduction and 4.
Analysts' consensus recommendation remained at Hold the entire time, but concerns about a stretched valuation have since taken a backseat to more fundamental concerns. True, being in the early stages of economic recovery and the promise of federal infrastructure spending benefits cyclical companies like CAT, but the related rise in costs remains a headwind for shares, notes UBS Global Research analyst Steven Fisher Hold. Baird analyst Mircea Dobre rates CAT at Outperform, but says Chinese commodity demand, rising oil and gas prices, and a slowdown in non-residential construction spending remain risks.
That works out to a consensus rating of Hold, with a slightly bullish tilt. The pharmaceutical giant topped Street estimates in the second quarter, but a failure to raise earnings guidance raised at least a few analysts' eyebrows. Although early launch metrics for new cancer drug Lumakras were encouraging, "we struggle to see any near to midterm drivers of significant upside for AMGN and so remain Neutral rated," Bristow writes.
William Blair Equity Research analyst Matt Phipps is likewise worried about how the most recent quarter unfolded. They expect the company to generate average annual EPS growth of 7.
After weighing the evidence, Piper Sandler analyst Christopher Donat, for one, sides with the bulls. On the other side of the trade, Credit Suisse, which rates shares at Underperform, recently added AXP to its list of highest-conviction sell calls. However, he also believes AXP remains on track for solid growth this year and beyond. As borderline as the Street's Buy call may be, let's not forget that AmEx is one of Warren Buffett's all-time favorite stocks. The CEO of Berkshire Hathaway first bought shares in the firm in and remains its largest shareholder by far today.
Analysts say there are two major developments that should get shares flying in the shorter term: China allowing the MAX back in the air; and the resumption of deliveries of the Dreamliner, which have been suspended over manufacturing flaws. True, BA has its doubters on the Street, but bullish ratings still outweigh the bearish ones. But now some analysts worry about increasingly difficult year-over-year comparisons — not to mention higher costs for raw materials and other expense pressures.
The market is even more concerned than the Street. But analyst Peter Grom maintains a Neutral Hold recommendation on shares, partly due to increased commodity and freight costs, as well as foreign exchange headwinds. The Street's consensus recommendation, however, still works out to Buy.
JPM's strength across multiple business lines and an improving economic backdrop make it a standout, analysts say. It also helps that interest rates appear to be headed directionally higher. Argus Research analyst Stephen Biggar Buy notes that the bank's most recent quarterly results "further demonstrated the benefits of JPM's vast revenue diversification.
Bullishness like Biggar's is predominant on the Street. Bears, however, see a stock that remains overpriced even as it lags the broader market by a wide margin this year. But given the company's track record, investors should "appreciate HON's sales growth and margin expansion opportunities, especially at this point in the economic cycle, as well as significant balance sheet capacity that can accelerate the transition to a Software Industrial," writes Walsh, who rates HON at Outperform Buy.
That said, this is hardly a growth stock. The Street forecasts EPS to increase at an average annual rate of just 3. CSCO is transitioning from being heavily dependent on hardware such as internet routers and switches to higher-growth software and cloud services. We note Cisco has easy comps for the next two quarters before they normalize. Henderson adds that although CSCO stock "could get a lift as it produces improved revenue over the year-ago declines in the comparisons, we hesitate to call this growth.
At Jefferies, analyst George Notter Buy says the global chip shortage is very much a current challenge, but focusing on that headwind misses the forest for the trees. The analyst further contends that there's "quite a bit of EPS power that Cisco could unlock once the supply chain issues eventually moderate.
A below-market valuation and the dividend yield should help keep a floor on the stock price. And analysts remain bullish on the investment bank's stock, regardless of those outsized gains.
Over at Jefferies, analyst Daniel Fannon initiated coverage of GS at Buy in June, citing strength in investment banking and capital markets, among other positives expected to drive shares higher. Interestingly, GS's supreme position in capital markets actually contributes to a Hold call from Argus Research. Overall, though, GS falls solidly in the range of a consensus Buy recommendation. CVX is up Wall Street has remained steadfast in its bullish view of CVX for more than 18 months — a period in which it never budged from its Hold call on XOM either.
So it goes. But there is indeed a compelling Buy case to be made for the second-largest integrated oil major, and plenty of analysts contend investors will be rewarded for their patience. Among the arguments in favor of the Dow stock, bulls point to its strong pharmaceutical pipeline, a rebound in demand for medical devices and recent acquisitions. He simply doesn't like the stock at current levels. As for being a total-return vehicle, few companies have shown a greater commitment to dividend growth.
Again, dividends really do add up. But now that the global economy is back on the move, analysts increasingly like KO as a recovery play. Thus, a one-point move in any of the component stocks will move the index by an identical number of points. The Dow is often re-evaluated to replace companies that no longer meet the listing criteria with those that do.
By , the index had grown to 30 components. Its composition has changed many times since then. The first change came just three months after the 30 component index was launched. In its first few years until roughly the Great Depression , there were numerous changes to its components.
The first large-scale change was in when eight stocks in the Dow were replaced. The most recent large-scale change to the composition of the Dow prior to took place in On Aug. The following are some important historical milestones achieved by the Dow:.
Many critics of the Dow argue that it does not significantly represent the state of the U. They believe the number of companies is too small and it neglects companies of different sizes.
Furthermore, critics believe that factoring only the price of a stock in the calculation does not accurately reflect a company, as much as considering a company's market cap would. In this manner, a company with a higher stock price but a smaller market cap would have more weight than a company with a smaller stock price but a larger market cap, which would poorly reflect the true size of a company.
Corporate Finance Institute. Accessed Oct. Associated Press. Library of Congress. US Markets. Stock Markets. Search Search:. Jason Hall. Can you buy Dow Jones stock? Your investment options include: Buy shares of all 30 companies included in the Dow Jones Industrial Average. With only 30 companies in the index , it's feasible to directly purchase the stock of each. Most brokers don't charge commissions on trades and many allow fractional share investments , meaning that you can buy partial shares.
This investment alternative requires you to manage 30 separate stocks and also make changes to your portfolio whenever the index changes although, historically, the index changes only every couple of years. Buy shares in a Dow-focused ETF. Buying shares in an ETF is simpler than investing in 30 separate companies, and you are not obligated to make changes to your portfolio when the companies listed by the Dow change.
The expense ratio of 0. Invest in Dow options or futures contracts. These types of securities are best suited for investors with advanced investing knowledge and experience since options and futures can be lucrative but also can generate substantial losses. How is the value of the Dow Jones Industrial Average calculated?
The Dow Jones Industrial Average vs. Nasdaq Composite Tracks every stock traded on the Nasdaq stock market exchange. Russell Index Tracks 2, small-cap and mid-cap stocks. Stock Market Indexes Take a bird's eye look at all four major indexes. What is the Dow Jones?
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