In the age of health care reform, today’s news will sound ridiculous to just about any investor. The Dow Jones Industrial Average (NYSEMKT: DIA) is making a crazy change among its 30 components. Kraft Foods Inc. (NASDAQ: KFT) is splitting itself up, so it should be no surprise that the food giant was going to lose its place in the DJIA.
The shock is that UnitedHealth Group, Inc. (NYSE: UNH) is going to replace Kraft in the index.
Are we or are we not in the age of health care reform? It is easy to argue that UnitedHealth is really just a financial company. Still, the DJIA already counts Bank of America Corp. (NYSE: BAC) and J.P. Morgan Chase & Co. (NYSE: JPM) in the DJIA. It also already has The Travelers Companies Inc. (NYSE: TRV) and American Express Co. (NYSE: AXP) in the DJIA.
Wells Fargo & Co. (NYSE: WFC) would have been a far better choice than UnitedHealth. With health care reform, the health care insurance sector is only going to further consolidate. There already have been many mergers, and UnitedHealth itself is the product of many health care insurance roll-ups over the past decade or so.
Investors will claim that they would have preferred to see Apple Inc. (NASDAQ: AAPL) or Google Inc. (NASDAQ: GOOG) added to the DJIA. The problem is that the share price is too high for an index that is a price-weighted index.
Today’s news just sounds a bit odd in the age we are living in.
JON C. OGG