It has always been said that when a company exits an index, we normally see an increase in the stock price while the newly entering stock onto the index usually experiences a stock price decrease. Well this seems to be the case with AT&T Inc. and Apple Inc.
Over the last 3 months, we have seen AT&T shares increase by 5.3 percent.
Meanwhile, on the other side, the stocks of Apple (AAPL, -1.00%) have declined 0.2 percent over the same period.
All this has taken place since Apple replaced AT&T on the blue chip Dow Jones Industrial Average (DJIA, -0.55%).
So it seems that history is repeating itself and according to analysts, this increase in AT&T’s outperformance is likely to continue over the next 3 months.
On the 18th of March, at the close of trading, AT&T was replaced by Apple.
While the stock of the tech giant has lost 0.2% and AT&T stocks have surged 5.3% over the same period, this is a strong contrast from the relative performance over the 3 months prior to the Dow change.
Prior to the change, AT&T stocks had inched up only 0.2% while the shares of Apple had increased by 14 percent.
Six weeks after the Dow change, AT&T kicked into action and started outperforming Apple.
Since then, AT&T has continued to climb and after 2 months from the Dow change, Apple was only up 1.2% while the stocks of AT&T were up already 2.3 percent.
With this trend, you might be wondering how Apple and AT&T will be performing in 3 months from now?
To put it into perspective, let’s look at another example.
When the Bank of America (BAC) left the Dow in September 2013, and was replaced by Goldman Sachs (GS), the shares of the bank increased by 8.03% after the first 3 months and then by 24.10% after 6 months. Meanwhile, the stocks of Goldman Sachs increased by 3.19 percent after 3 months and declined by 0.31 percent after 6 months.
Based on this, do you think we can expect to see a decline in Apple shares while AT&T shares continue to climb?
MT4 Chart: AT&T
MT4 Chart: Apple