E-commerce giant Amazon.com Inc. (AMZN - Free Report) joined the blue-chip index, Dow Jones Industrial Average, replacing drugstore operator Walgreens Boots Alliance (WBA - Free Report) on Feb 26.
The reshuffle reflects the ongoing shift in economic power from traditional brick-and-mortar retail to e-commerce and technology-driven companies. The inclusion of Amazon in the Dow marks a significant milestone in the recognition of the e-commerce giant's influence and its role in the broader market.
The shift was prompted by Walmart's (WMT - Free Report) decision to execute a 3-to-1 stock split, which has reduced its stock's weighting in the index. The Dow is a price-weighted index. So, stocks that fetch higher prices are given more weight. Amazon's addition has increased consumer retail exposure within the index, alongside enhancing the representation of various other business sectors that Amazon engages in, including cloud computing, digital streaming and artificial intelligence, among others (read: ).
Amazon took the 17th position in the index, while Walmart's weighting dropped to 26 from 17. UnitedHealth Group remained the most heavily weighted stock in the index. Amazon's entry into the Dow Jones is not just a symbolic change but a reflection of the evolving priorities and dynamics within the investment world. It signals a broader recognition of the value and impact of technology and e-commerce sectors, encouraging investors to perhaps rethink their investment approaches in light of these trends.
While the Dow Jones is making new record highs, its performance is lagging behind the S&P and Nasdaq over the past year. The underperformance is due to the lack of exposure in tech stocks and the “Magnificent Seven” companies in particular. The Dow includes two of the Magnificent Seven — Apple (AAPL - Free Report) and Microsoft (MSFT - Free Report) . Amazon will be the third. As such, the addition of Amazon will help Dow Jones catch up with the S&P 500 gains. The shares of the commerce giant have surged more than 80% over the past year (read: ETFs to Tap on Amazon's Strong Q4 Earnings).
Given this, investors seeking to tap the potential strength in the Dow Jones trend could consider SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , iShares Dow Jones U.S. ETF (IYY - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) and First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) .
ETFs to Tap
SPDR Dow Jones Industrial Average ETF (DIA - Free Report)
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with AUM of $33.1 billion and an average daily volume of 3.8 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket with each making up for less than 9% share. Financials (21.7%), information technology (19.5%), healthcare (18.5%), consumer discretionary (15.9%) and industrials (14.613.7%) and are the top five sectors (read: Will Dow Jones ETFs Rule in 2024?).
SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares Dow Jones U.S. ETF (IYY - Free Report)
iShares Dow Jones U.S. ETF tracks the Dow Jones U.S. Index, holding 1077 stocks in its basket, with none accounting for more than 6.4% of the assets. Information technology takes the largest share at 29%, while financials, healthcare and consumer discretionary round off the next spots with double-digit exposure each.
iShares Dow Jones U.S. ETF has amassed $1.9 billion in its asset base while trading in an average daily volume of 36,000 shares. It charges 20 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 27 stocks in its basket, with none accounting for more than 12% of the assets.
Invesco Dow Jones Industrial Average Dividend ETF has been able to manage assets worth $294.4 million while trading in a volume of 56,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3.
First Trust Dow 30 Equal Weight ETF (EDOW - Free Report)
First Trust Dow 30 Equal Weight ETF offers equal-weight exposure to all the 30 components of the Dow Jones Industrial Average by tracking the Dow Jones Industrial Average Equal Weight Index.
First Trust Dow 30 Equal Weight ETF has accumulated $249.1 million in its asset base and trades in an average daily volume of 58,000 shares. It charges 50 bps in annual fees.
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