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In the past 10 years, Apple, Inc. (AAPL) has emerged as one of the largest and most successful manufacturers of personal computers and technology devices for personal use. The company has stormed ahead of the competition in terms of profitability and stock price appreciation, and while it remains an underling in the personal computer space in terms of market share, its innovative iPod, iPhone, and iPad products are leaders in their respective categories. Moreover, the company has become a household name and synonymous with anything tech-related over the past four years. Given its gargantuan size by market capitalization, enormous revenue stream, skyrocketing stock price, and clout within the tech industry, many ponder why it has not yet been picked up by the Dow Jones Industrial Average.

Many of the aforementioned factors are all valid reasons to include Apple in what is arguably the most touted market index in the world. Especially considering that the five other major tech components: Microsoft (MSFT - Free Microsoft Stock Report), Cisco Systems (CSCO - Free Cisco Stock Report), Intel Corp. (INTC - Free Intel Stock Report), Hewlett Packard (HPQ - Free Hewlett Packard Stock Report), and IBM Corp. (IBM - Free IBM Stock Report) are smaller by market cap and have been somewhat less newsworthy of late. On the other hand, there are several equally valid, if not more rational, reasons not to include Apple in the Dow 30. The primary reason being that the Dow is a price weighted index, i.e., the stocks with the highest prices make up the largest proportion of the index. Given that Apple’s price (over $300) is double that of the highest priced component (IBM), Apple would immediately become the most influential stock in the most venerable index, by a wide margin. Simply put, its inclusion would distort the index. Therefore, in a sense, Apple has been excluded because of its favor in the stock market and would be obliged to split its stock in order to make the cut.

This logic also calls attention to some other critical points about the company, including the concern that Apple may become a faint shadow of its former self should Steve Jobs leave the helm, as he is widely considered the primary driving force behind the company’s trailblazing innovation and product development. Indeed, many contend that the business has yet to prove itself as a viable self-sufficient entity without Jobs behind the wheel. Another sore point is that Apple is a pure growth stock with a highly growth-oriented business model, trading at nearly four times sales per share and more than four times book value. Thus, it is fair to argue that the company is always looking for the next big growth opportunity and that its stock price is driven higher by expectations of future profit gains generated from its pursuit of the next big growth opportunity. Conversely, one of the common stipulations of the components of the Dow is that they adequately reflect the broad scope of the entire stock market, and are typically companies that produce essential goods and services, while exhibiting steady consistent gains based on a fairly predictable business model.

All in all, it stands to reason that, historically, the Dow has been deemed an accurate representation of the most important companies relative to the U.S. economy at any given time. With that in mind, there is no disputing that Apple has become one of, if not the most dynamic tech business of the 21st Century to date, from a consumer standpoint. In addition, it is larger than 29 of the 30 components of the Dow, by market cap. Moreover, in the age of the ongoing digital evolution, where technology has become one of the most exciting and momentous industries of the era, it is hard to see a future where Apple does not become a component of the Dow at some point.
 

At the time of this article’s writing, the author did not have any positions in any of the companies mentioned.