The Daily Dow
Friday, June 27, 1997
by Robert Sheard

LEXINGTON, KY. (June 27, 1997) -- It's been more than three months now since the editors at Dow Jones & Co. revised the composition of the Dow Jones Industrial Average. In the middle of March, the editors replaced four stocks, the first such revision in five years.

Dropped from the list were BETHLEHEM STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BS)") else Response.Write("(NYSE: BS)") end if %>, TEXACO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TX)") else Response.Write("(NYSE: TX)") end if %>, WESTINGHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WX)") else Response.Write("(NYSE: WX)") end if %>, and WOOLWORTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: Z)") else Response.Write("(NYSE: Z)") end if %>. Added in their stead were HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>, JOHNSON & JOHNSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %>, TRAVELERS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %>, and WAL-MART <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %>.

At the time the revisions were announced, a number of readers expressed concern about the stocks they might have held that were leaving the Dow (especially Texaco and Woolworth, which at various times in the last two years had been in the high-yield rankings). My answer at the time was a very non-committal one: I didn't know what to expect but I didn't think the result would be a wholesale sell-off in these stocks.

A quarter has gone by now and the revision is now behind us. Let's look at how the two groups of stocks have performed in the ensuing three months.

Dropped Stocks
Bethlehem Steel     +24%
Texaco               +8%
Westinghouse        +22%
Woolworth            +6%
Group               +15%

Added Stocks
Hewlett-Packard       -2%
Johnson & Johnson    +12%
Travelers Group       23%
Wal-Mart             +14%
Group                +12%

The Dow during this stretch gained 11%, so both groups actually fared better than the overall index, but the four stocks that were "suffering" under the cloud of having been dropped from the most famous index in the world actually did better than their replacements.

I'm not sure I want to make too much of this, but it's another piece of evidence that news items like this shouldn't roil you. The strong companies will remain strong, even if they have to absorb a seemingly negative story here and there. In some races, the slow movers really are the winners.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

Stock  Change   Last
--------------------
T    -   3/8   35.75
GM   +   7/16  55.81
CHV  -1  1/8   72.75
MMM  -   1/8   101.88

                 Day   Month    Year
        FOOL-4   -0.56%   2.04%   2.48%
        DJIA     +0.44%   4.87%  19.22%
        S&P 500  +0.41%   4.60%  19.78%
        NASDAQ   +0.12%   2.70%  11.40%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  120 3M            83.00    101.88    22.74%
   1/2/97  153 Chevron       65.00     72.75    11.92%
   1/2/97  179 Gen. Motor    55.75     55.81     0.11%
   1/2/97  479 AT&T          41.75     35.75   -14.37%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  120 3M          9960.00  12225.00  $2265.00
   1/2/97  153 Chevron     9945.00  11130.75  $1185.75
   1/2/97  179 Gen. Motor  9979.25   9990.44    $11.19
   1/2/97  479 AT&T       19998.25  17124.25 -$2874.00


                             CASH    $767.60
                            TOTAL  $51238.04