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What the Three New Stocks Bring to the Dow ETF


S&P Dow Jones Indices is shaking things up, adding three new components to the Dow Jones Industrial Average, the benchmark index for the SPDR Dow Jones Industrial Average ETF (DIA) .

As of September 23, Goldman Sachs (GS), Visa (NYSE: V) and Nike (NKE) will join the Dow index, replacing Bank of America (BAC), Hewlett-Packard (HPQ) and Alcoa (AA). [Revamped Dow Jones Industrial ETF to Keep ‘Quality Tilt’]

S&P Capital IQ analysts have a “Buy” recommendation on Goldman Sachs. Visa and Nike also show favorable attributes, Todd Rosenbluth, S&P Capital IQ Director of ETF Research, said in a note. Goldman Sachs could witness improved performance, which would lead to continued share repurchases. The company invests in the global capital market and is one of the best investment bankers.

Nike is making great merchandising and brand repositioning changes in China to better meet the needs of discerning and sophisticated Chinese consumers, but the company may not return to growth in China over the short-term.

“NKE’s long-term growth story remains intact,” S&P Capital IQ equity analyst Jason Asaeda said.

S&P Capital IQ equity analyst Sonia Parechanian points to Visa’s business model, high level of cash flows, healthy balance sheet and payment volume growth ahead, “given a U.S. economic recovery, aided by the secular trend toward non-cash payments and strong growth prospects in emerging markets.”

The three new additions are expected to fit well in Dow’s high-quality tilt methodology.

“We believe these three will fit in well with other stocks currently in the index, which according to S&P Capital IQ are collectively low risk, based on S&P Quality Rankings and Standard & Poor’s Credit Ratings,” Rosenbluth added. [Why Apple and Google Didn’t Join the Dow Jones Industrial ETF]

The SPDR Dow Jones Industrial Average ETF’s top holdings include International Business Machines (IBM) 9.6%, Chevron Corp (CVX) 6.2%, 3M Co. (MMM) 5.9%, Boeing (BA) 5.6% and United Technologies Corp. (UTX) 5.4%.

SPDR Dow Jones Industrial Average ETF

For more information on the Dow, visit our Dow Jones Industrial Average category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own NKE.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.