Newly Added High-Priced Stocks Drive DJIA to All-Time High 16,000

The Dow Jones Industrial Average (DJIA) is a very strange index considering that it is “The Stock Market” when most people who are not traders discuss how stocks did on any given day. Its most recent index component change is helping to propel the index to all-time highs, and it hit 16,000 for the first time on Monday.

The DJIA is a price-weighted index rather than an adjust market cap-weight index. This means that the share price of the components determines the value in the index, and the total market capitalization or the implied free-float market capitalization mean nothing.

Visa Inc. (NYSE: V) was one of the newly added DJIA components and was an interesting choice because it took over the most important DJIA stock status from International Business Machines Corp. (NYSE: IBM) due to its larger share price. Goldman Sachs Group Inc. (NYSE: GS) is now the third most important DJIA stock as it trades close to $165 again. All three stocks were trading higher right after the open on Monday morning, but trading has turned mixed on likely profit taking.

Visa Inc. (NYSE: V) was as high as $202.71 earlier in the morning, but the stock was down 0.25% at $201.50. Visa still trades at a whopping 22 times expected 2014 earnings, a very high multiple for a DJIA stock under most circumstances.

International Business Machines Corp. (NYSE: IBM) is up 0.35% at $183.80. This one remains under pressure, considering the bull market, and Ginny Rometty’s continuation of the $20 in earnings per share goal by 2015 is coming at too high of a price. It doesn’t even matter that Warren Buffett is a big owner at the moment, considering we have not seen that Team Buffett owns more shares as he suggested.

Goldman Sachs Group Inc. (NYSE: GS) was up almost 1.5% at $166.00, against a 52-week high of $170.00. Maybe being in the press for scalping clients is not good, but it remains the top destination of the wealthy for investment advice. It also trades at only 11 times expected earnings, making it among the cheaper DJIA components.

Boeing Co. (NYSE: BA) was the stock we recently said would likely become the most important stock in the DJIA because its high weighting was projected to grow far more, up to $164, by an analyst. Boeing shares were up more than 3% to $140 in early Monday trading, after securing what was said to be $100 billion in orders at the Dubai airshow. Shares briefly hit a new all-time high of $142 on Monday morning.