AT&T shareholders should rejoice at Dow removal

After first entering the Dow Jones industrial average in 1916, AT&T exits nearly a century later as Apple, the world's largest and most popular stock, takes its place.

Many will say this change, years in the making by the index committee at Dow Jones, marks a passing of the baton. Old Ma Bell's days are over, with its landline and cellular business quickly becoming a commodity.

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And Apple is the perfect company for its time, they will say. It's the maker of the Internet ecosystem of hardware and software that we can't live without.

Time and time again, new trends replace old ones in the Dow. For example, take Cisco replacing General Motors in 2009 or Nike replacing Alcoa in 2013.

But this theory is not one to base your investing on, history shows.

Alcoa is up 75 percent since that exit. Hewlett-Packard, replaced by Visa in 2013, is up almost 60 percent since then. Citigroup, replaced by Travelers in the wake of the financial crisis in 2009, is up 58 percent.

In the last seven years, there were two underperformers, but they involved extenuating circumstances. GM was removed because it went into bankruptcy. And Bank of America, kicked out two years ago, is still working through the credit crisis, certainly a much more-dire situation than faced today by AT&T, which has a strong broadband business and a DirectTV merger in the works.

AT&T shares fell Friday morning in response to the announcement so maybe investors don't know their history.

Read MoreApple to replace AT&T in the Dow Jones Industrial Average

Bradd Kern of investment firm Armored Wolf explains the possible reason behind this initial weakness by those that exited, followed by outperformance.

"Due to index player selling, (the) first day move is very technical and negative, which you would expect to be resolved over the course of a year as fundamentally driven, nonindex players do their work and pick up the pieces. So immediately you're a step ahead with respect to expected performance."

He added that those removed are "generally out of favor, value-oriented companes" that many investors look to add to their portfolios.

You can't fault Dow Jones however.

"The Dow committee has a habit of giving up on companies at secular lows," said Nicholas Colas, chief market strategist at Convergex. "I have often thought that the Dow was as close to an actively managed portfolio as you can get. There is a huge scoop of human judgment when you try to whittle things down to 30 names."

Now, addition into the Dow is not the contrarian kiss of death, but the performance does not match those kicked out.

Note that Goldman Sachs has underperformed that market since its inclusion, as has Chevron. But the others still have sizable gains.

But some do see the inclusion as the kiss of death for Apple.

"Apple executive should refuse to join Dow," wrote Trip Chowdhry of Global Equities Research in a report to clients Thursday morning. "Companies in (the) Dow have historically symbolized companies which are boring, have zero innovation, complacent and are inching closer to irrelevance by the day ... which is definitely not what Apple is all about."

Still, history shows that the move is not a reason to sell Apple, but it certainly could be a reason to own AT&T.

(Editor's note: AT&T was first added in 1916, but was deleted in 2004. A year later it was back in after its merger with SBC Communications.)