Andy Zaky

How Stocks Perform After Being Added to the Dow

Ok. I cannot comprehend for the life of me why people think Google should be added to the dow rather than any of these other companies you've listed? In fact, none of those companies ought to be added because they're all high beta stocks. High beta stocks would keep volatility high in the index and thus drive away potential investors who see it as uncertainty in the market. But why Google in particular? Google is small beans compared to some of the other companies you mention. Apple is a far more viable candidate than Google as Apple's financial are far superior on nearly every front. See for yourself:

Apple
Cash: $28 Billion
2009 Expected Revenue: $35.4 Billion
2010 Expected Revenue: $40.9 Billion

Google
Cash: $17 Billion
2009 Expected Revenue: $16.79 Billion
2010 Expected Revenue: $19.07 Billion

As you can see. Google is small beans compared to Apple. To be a potential dow component, you've got to be reining in the revenue. Sales, beta and cash are the key metrices that determine whether a company is dow viable. And the key reason that revenue and net cash are central is because a company can always figure out a way to strengthen margins but its easy to produce $50 billion in sales. Cash is also key because it tells a story about the strength of the company's balance sheet. Apple does more in revenue, has a similar growth rate as google on net income, has more 50% more in net cash and is generally a larger company than Google. And both are high beta stocks. Google shouldn't be even mentioned at all.