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Why Apple Should Replace Cisco in the Dow

I have nothing against Cisco ( CSCO), the company or its products for that matter. I do have a problem with the stock still being a part of the Dow Jones Industrial Average, however.

It would be nice if the 30 stocks in the Dow were kept a little more current and reflective of today's economy. If that were the case, maybe the Dow would be a lot higher than 13,000 at the current time.

It is bad enough that Cisco is so widely held and talked about in the financial press so often, but does it have to continue to be representative of the state of our nation's economy? I suppose most money managers like me would like to see duds like Cisco and Alcoa remain in the Dow - it makes it easier for us to beat the index - but I would much rather see fresher, more vibrant companies represent us.

We don't send our mediocre golfers to the Ryder Cup. We don't send our average athletes to the Olympic Games. Why then can't we pick a better team to represent corporate America?

What is wrong with Cisco you say? This $90 billion dollar company helped take us from mainframe computers, to personal computers, to local area and wide area networks. Where is Kaypro? Where is Novell? I am not saying that Cisco's technology is obsolete, but it is obvious that it's best days are far back in the rear view mirror.

Let's just look at the returns that stock has delivered to its investors over the years:

Data from Best Stocks Now App

Over the last 10 years, the stock has underperformed the S&P 500. While the index was delivering average annual total returns of just 2.6% per year, Cisco was dishing out 1.1% average returns. This is like a turtle passing a snail on the highway.

Over the last five years, the stock has really helped out money managers trying to beat the Dow. Cisco has been going backwards by 8.2% per year, while the S&P 500 has been going in reverse by a much more palatable 1.9% per year.
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AAPL $93.64 -0.11%
CSCO $27.37 -0.44%
FB $118.57 0.84%
GOOG $698.21 0.75%
TSLA $241.80 0.43%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

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