Will Visa Replace Citi in the Dow Jones?


I did a piece recently, New Candidates for the Dow Jones, and since then, things have gotten even worse for Bank of America (BAC), Citigroup (C) and a handful of other DJIA names.

While the Index Editor who oversees the Dow, John Prestbo, has gone on record saying there won’t be any changes right now, I believe they are simply waiting for the crisis to show some signs of abatement before shuffling the zombies out of the index.

Eddy Elfenbein who writes Crossing Wall Street, one of my fave blogs, has a list of 19 candidates on his site today, including Abbott Labs (ABT), Pepsi (PEP), Oracle (ORCL) and Bristol Myers Squibb (BMY) that could take the place of Citi.

His list is a good one, however, I think he missed three fairly obvious candidates that are financial in nature and highly representative of our economy.

The first two are insurers, one is Allstate (ALL) the other is Travelers (TRV).  The third company I think should be on that list is Visa Inc. (V).

Visa, with a $41 billion market cap, is the largest credit card company on earth and although it hasn’t been public long, it has been in existence forever.  Mastercard (MA) does not quite have the global reach of Visa, but does have a respectable market cap as well.  Visa’s market cap is twice the size of Mastercard’s and it dwarfs that of current component American Express (AXP) as Amex is on the hook for their cardholders’ receivables, while Visa just handles the processing and transactions.

With every passing day, more and more transactions are settled with plastic as opposed to paper and this trend will not reverse any time soon, if ever.  Visa is probably a more meaningful entity in the US economy than many of the current components of the Dow and will probably grow in stature substantially over the next decade.

Full Disclosure:  As of this writing, I have no positions in any of the stocks mentioned.  In the future this is subject to change and I may be long or short any of the stocks mentioned for either client or personal accounts at any time.  The views expressed in this post are my own and are subject to change without notification.  Please do not construe this information as an invitation to buy or sell any securities.  Nothing written above should be viewed as research or a recommendation of any kind.  For a full disclaimer, please visit this site’s Terms and Conditions page.

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