Thursday, July 12, 2012

Shake, Rattle and Roll: Dow Industrials Face Titsup As Kraft Split Approaches




The new owners of the Dow Jones Industrial Average (INDU) will face their first decision on how the 116-year-old gauge should be composed when Kraft Foods Inc. splits itself in two later this year, Bloomberg reports.

Kraft, with a $69.8 billion market value that ranks 20th in the 30-stock gauge, may be dropped because the spinoff of its U.S. grocery business will shrink the world’s second-largest food company, said Keith Wirtz at Fifth Third Asset Management. Hewlett-Packard Co. and Alcoa Inc. (AA) are vulnerable after losing almost half of their value in the past year, according to Richard Moroney, editor of the Dow Theory Forecasts newsletter.

 “Kraft’s market cap is not going to be big enough to make them a certain stock to stay in,” Moroney, who manages $165 million at Hammond, Indiana-based Horizon Investment Services, said in a phone interview on July 9. “They’re already at the lower side.” The selection committee is “always clear that any sort of corporate actions put all 30 components up for grabs. I wouldn’t be surprised to see a switch,” he said…

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