Bill Gunderson

I have written many articles in the past about what a great stock Visa (V) is. Well finally, somebody else besides me must also think it is a great company because it was just added to the DOW Jones Industrial Average (DJIA) alongside Nike (NKE) and Goldman Sachs (GS)!

It isn’t every day that a company gets to join the DJIA, and, if it does, it means that another company must go. After all, there is only room for 30 companies. And as Visa, Nike, and Goldman Sachs are now being added, Alcoa, Bank of America, and Hewlett-Packard are all being kicked to the curb. This is the biggest DJIA membership change to take place in almost ten years. Alcoa has been a member for 54 years, HP, a member for 16; and Bank of America—five. What took so long?

In my opinion, these stocks are getting kicked out because of their lousy performance against the market over many years. Again, what took so long?

Let’s begin with Alcoa (AA).

Alcoa has returned an average of negative 10 percent per year over the last ten years! That is right-NEGATIVE 10 percent per year!

Over the last five years, it has done even worse than that. The stock has averaged negative 20% per year! It sounds like the folks at Dow Jones are picking stocks for their index just like many individual investors pick their own. Buy big stodgy old company of yesteryear that have good name recognition-Microsoft, Cisco, Hewlett Packard, etc. etc. etc.

It makes you wonder where the Dow would be today had they kept their list a little more current over at Dow Jones.

Let’s next check out another exile-Bank of America.

The shares have done a little bit better than Alcoa, but not by much!

Shares have average negative 6.4% per year over the last ten years, and that includes the dividends!

The stock has delivered an average -14% per year over the last five years. In addition to this the stock was down a gut-wrenching 63% in 2008! This is hardly normal “blue-chip” behavior.

Would Bank of America still be around today if it were not for the U.S. taxpayer?

Again, it makes one wonder where the Dow would be today if it had well managed companies in it as opposed to mismanaged companies like Bank of America.

Two duds in a row, what about Hewlett Packard (HPQ)?

While the performance of Hewlett has not been as bad as the other two stinkers, it has not been very good either.

Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now.