Its Own Drummer

AAPL has recovered its losses following the July 24th earnings announcement.

Apple shares plunged last week in the wake of disappointing earnings "that missed expectations by a country mile" and a lowered near-term outlook.

The stock began to recover, then received a further boost on Monday when securities analyst Toni Sacconaghi argued that the time was "ripe for Apple’s potential inclusion in the DJIA [Dow Jones Industrial Average]", as well as an Apple stock split. His reasons:

(1) Technology companies are under-represented in Dow (compared to the S&P 500 the Dow is under-weight technology by ~370 bps), with IBM accounting for over two-thirds of the current tech weighting;

(2) A stock split would enable AAPL to be considered for Dow inclusion, given that is a price based index;

(3) Apple’s recent introduction of a dividend is consistent with other Dow components, all of whom pay a dividend.

In the Internet age a meme goes viral and becomes seemingly unstoppable. However, in this case it's way premature. No one in a position of authority has said that a stock split, much less Apple joining the Dow, has even been discussed. It took years of cash accumulation (plus the death of Steve Jobs) to occur before Apple began to pay a dividend. Besides,

Apple’s got other things on its mind these days; locking horns with Samsung in court, figuring out what to do or not do with its $100 billion plus cash hoard, not planning the unannounced launch of the unannounced iPhone 5 on the not-confirmed date of Sept. 12.

So, we’d imagine the company isn’t thinking about whether or not it might be added to, or belongs, in the Dow Jones Industrial Average.

One thing is certain: the Dow needs Apple more than Apple needs the Dow.