The Dow Jones' 5 Most Important Stocks
There's simply not a stock market index on the planet that has more history behind it than the iconic Dow Jones Industrial Average (DJINDICES: ^DJI). The Dow has been a mainstay on Wall Street for more than 124 years, and today houses 30 well-known, time-tested U.S. multinational companies.
But this widely followed index is flawed. Whereas other major indexes, such as the broad-based S&P 500, are weighted by market cap (i.e., larger companies exert more weight within the index), the Dow Jones is a price-weighted index. In other words, only a company's share price matters in calculating the point fluctuations within the index.
Thus, when tech kingpin Apple (NASDAQ: AAPL) chose to split its stock 4-for-1 on Aug. 31, it went from being the Dow Jones' most influential stock by a mile (Apple's share price was nearly $500) to its 20th-most important stock as of this past weekend. In fact, one of the interesting quirks of this price-weighted model is that the index's seven-largest components by market cap, including trillion-dollar stocks Apple and Microsoft, aren't among the Dow's five most-important stocks.
Source Fool.com
