Nvidia and Sherwin-Williams to enter Dow Jones stock index as Intel, Dow exit

Beginning Friday, two of the 30 companies that make up the Dow Jones Industrial Average are going out, and two are going in.

On the outs: semiconductor maker Intel and Dow Inc., a materials science company, which by the way, has no relationship with the Dow Jones stock index. They’re being replaced, respectively, by Nvidia and Sherwin-Williams.

It’s been said that being in the Dow is a sign you’ve made it, and being out is a sign you’re no longer one of the cool kids.

Just like the cool kids in high school, you’ve heard of who’s in the Dow. 

“These are name-brand companies, everything from Walmart to Goldman Sachs to United Healthcare,” said James Angel, a finance professor at Georgetown University.

He said the composition of the Dow is meant to reflect the U.S. stock market and reveal how it’s doing at a glance. The Dow is what’s called a price-weighted index. That means the higher the price of a stock, the more it can swing the index, or not.

Intel’s stock price, for one, has fallen significantly over the past few years. “It wasn’t representing the semiconductor group the way the index is supposed to represent it,” said Howard Silverblatt with S&P Dow Jones Indices. That’s the administrator of the Dow. 

Silverblatt said a committee decides which companies are in the index and it chose to swap in Nvidia, an artificial intelligence powerhouse with a high stock price, because it wants the semiconductor industry to have a stronger presence.

Similarly, he said Sherwin-Williams better represents how the materials industry is doing than Dow Inc., which it’s replacing.

Mike Harrison, an analyst at Seaport Research Partners, noted that Sherwin-Williams’ stock price has been on a tear recently. “So, we’re looking at a company that’s basically grown about 25 times in the last 20 years, which is a really, really impressive track record,” he said.

Sherwin-Williams’ main business is paint, and Harrison said its presence in many brick-and-mortar stores has helped it make inroads with the pro contractor market lately.

While success like this can get you into the in crowd — in this case, the Dow — the members don’t change that often.

But if you’ve been in and are now out, it is possible to get back in. Silverblatt said General Electric has been in and out three times.