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Dow and Kraft Reunited

Welcome Back to the Dow, Kraft !

While Kraft Foods will be joining the Dow Industrials on Monday (see full story here), in a way, it's not the first time it has been a part of the Dow. Recall, Kraft Foods was fully spun off by Altria Group last year. Of course, before it was removed from the Dow this past February, Altria (formerly named Philip Morris) had been a member of the Dow for over 22 years. See the brief timeline below for more details on the history.

  • Oct. 1985 - Philip Morris joins the Dow Industrials
  • 1988 - Philip Morris buys Kraft
  • 1995 - Philip Morris integrates its Kraft and General Foods divisions to form Kraft Foods
  • Jan. 2003 - Philip Morris changes name to Altria Group
  • Mar. 2007 - Altria completes spinoff of Kraft Foods
  • Feb. 2008 - Altria removed from Dow Industrials
  • Sept. 2008 - Kraft Foods added to Dow Industrials

Index Now Underweight Financials

Dow Jones Indexes points out that removing AIG from the Dow will make the index underweighted in financials. But what will the sector breakdown of the new Dow Industrials look like? Here’s how the Dow’s new sector weightings will stack up vs. the S&P 500’s sector weightings (based on yesterday’s prices and market caps):

Dow Industrials S&P 500

Consumer Discretionary 9.8% 8.9%

Consumer Staples 16.2% 12.5%

Energy 11.7% 13.5%

Financials 8.3% 14.3%

Healthcare 8.8% 13.2%

Industrials 20.5% 11.4%

Materials 5.3% 3.7%

Technology 15.0% 15.9%

Telecom 4.5% 3.1%

Utilities 0.0% 3.5%

The addition of Kraft Foods will raise the weighting for consumer staples stocks by approximately 2.5%, making that sector more significant in the Dow compared to the S&P. Other disparities between the two indexes are apparent too. For example, the financials sector is the 4th smallest in the Dow Industrials, but the second biggest in the S&P 500. Meanwhile, industrial stocks have nearly double the impact in the Dow Jones Industrial Average as they do in the S&P 500. Additionally, while there are no utilities in the Dow Industrials, keep in mind Dow Jones Indexes also publishes the Dow Jones Utility Average which tracks 14 utility companies.

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