Old Dow New Dow<
By Dian Vujovich
It’s that time of month again.
For the past three months I’ve been running a summary of how the Dow Jones Industrial Average has performed in one-month increments. I began with a blog posted during the first week of April (titled: Got 20 Bucks?) that looked back at how stock prices had performed during the previous four weeks. Not using official end-of-month figures, my review ends with the performance of the Dow stocks sometime during the first week of the new month. Nothing scientific about it–simply a look back.
The intent was to use monthly performance increments to show a couple of things. The first, point out how prices on the 30 stocks that make up the Dow Jones Industrial Average had fallen to really low per share prices. The second, make readers think about the opportunities available to them rather than concentrate on the fears that tumbling markets create. After all, throughout the Dow’s history, stock prices have recovered sooner or later.
Timing of that first blog was either uncanny, divinely inspired or simply a testament to a good example of a woman’s intuition. Not sure which, or even if any, but I do know that since March the market, as represented by the DJIA, has skyrocketed. From Jason Zweig’s, The Intelligent Investor, in the WSJ on June 6th: “In the 62 days since March 9, the Dow is up 34 percent, the fifth-fastest recovery from a bear-market low in the history of the index.”
So yes, Virginia, a fallen market can turn around and rise. And when it does, often does so quickly.
Look at the closing prices of the DJIA on June 5th, three stocks were selling under $10 a share: AIG at $1.71; General Motors at 75 cents; and Citigroup at $3.46. One needed less than six bucks to purchase one share of each—commission not included.
Those selling over $10 and under $20 included these five: Alcoa at $10.94, Bank of America, $11.86; Pfizer, $14.51; Intel at $15.92; and General Electric, $13.54.
To purchase one share of each of the 30 Dow stocks would have run $1075.20 based on Friday’s closing prices. On March 4th, all you would have needed was $858.58. At that time there were a total of 12 stocks selling under $20 per share. Now there are only eight.
But just as prices change so can the Dow components.
Beginning tomorrow, June 8th, the Dow 30 says “goodbye” to Citigroup and General Motors and “hello” to Travelers and Cisco Systems.
Other than knowing that, it’s anybody’s guess where we’ll see Dow shares trade over the short term. One thing is for sure, I’ll keep you posted.
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