Alcoa Inc (NYSE:AA) – not a “wow” for Dow any longer?
News has it that Alcoa Inc (NYSE:AA) is to be taken off the Dow Jones Average. Investors bank on the Dow Jones Industrials that indicates the prime-crop of top American companies. However, not every Dow component is always as potent as its peers, and lately, the number of challenges that AA has faced have led many to believe that the Dow will direct it to the “exit” sign in the future.
AA holds a place of importance in the stock market. This is because, traditionally, its quarterly report officially marks the beginning of the earnings-season, every three months. Previously known as the Aluminum Corp. of China Limited, AA has been a part of the Dow since the year 1959. However, of late the company has lost its Dow allure. The dismal aluminum market has wrecked havoc not just on AA but on most companies in the segment as well.
Alternatives to aluminum?
The Dow may be able to make some better choices in the future if it considers bigger companies that are exposed to more commodities. Aluminum is definitely an important product in industrial production, but steel, copper and some other industrial metals have been on the Dow before. There is a possibility that if Alcoa is replaced with a larger industrial metals producer who is broad-based, it might just blend in better with the overall level that Dow operates at.
The move will not be a quick one
Taking the half-century history that Alcoa has had in the Dow, the board cannot be expected to move through some quick action. Of course, the possibility that AA might just bounce back, cannot be ruled-out completely either, but the chances of that happening seem to be pretty slim.
Dow and the rest
The Dow Jones Industrial Average is an average value of 30, big industrial stocks. Large companies such as General Motors, IBM, Goodyear and Exxon are those that are part of this index. There are all kinds of averages that measure-up companies. The S&P 500 is an average-value of 500 large companies. The Russell 2000 follows an average of 2,000 small companies and there are others as well. Many investors take guidance about companies by following the trends on these indices.