Sherwin Williams joins Dow 30
Joining the Dow Jones Industrial Average is a mark of recognition in corporate America.
One of the oldest stock market indexes to trade, the DJIA includes the 30 most influential and well-capitalized companies in America. It was created by Wall Street Journal co-founder Charles Dow and his business associate, Edward Jones, in 1896, and remains a vital indicator of economic health.
The index includes such blue chippers as 3M, The Home Depot, Nike, Apple, and American Express. Now, it also includes the biggest paint company in the U.S.
Sherwin-Williams joined the index on Monday as part of a rare reshuffling of the Dow’s 30 companies. Fittingly, Sherwin-Williams replaced the chemical company Dow Inc., which had the lowest market cap in the index (Herbert Henry Dow, the founder of Dow Inc., was not related to Charles Dow).
“The index changes were initiated to ensure a more representative exposure to … the materials sector,” S&P Global said in a press release.
Dow Inc. had a footprint in the coatings industry as a formulator of additives for paint to enhance durability, but it certainly is not the major industry player that Sherwin-Williams is. Both companies fall under the banner of “Chemicals” in the DJIA’s calculation.
The inclusion of Sherwin-Williams in the price-weighted index was largely overlooked in favor of the other big change. Semiconductor maker Nvidia, which regularly rivals Apple for the richest company on earth, joined the index after its record-shattering run on the back of its A.I. chips.
Being added to the DJIA is normally viewed as a good thing for the company’s stock. Inclusion opens the door to more institutional investments and virtually guarantees a place in every 401k.
Indeed, Sherwin-Williams’ price popped over 5% on the news Monday, before later pairing gains as the broader market bogged down.
It’s not all blue skies though. Sherwin-Williams investors will have to look out for the so-called “Curse of the Dow.”
Oddly enough, stocks added to the Dow lost an average of 20% of their value in the first year of inclusion, according to a study of 10 years of data.
Famous examples include Microsoft, which plunged 25% in the first year (anyone who bought that year and held until today certainly isn’t complaining).
Either way, being inducted into the Dow 30 is a massive win for Sherwin-Williams, and a sign of just how vital painting is to the economy.
