Buy Verizon over Alphabet if a history of Dow changes is any guide

§ 01 Executive Snapshot

• What: Verizon will be replaced by Alphabet in the Dow Jones Industrial Average on June 29, 2026.
• Who: Verizon (current holder), Alphabet (incoming company).
• Why it matters: The historical trend indicates that stocks removed from the Dow often outperform those added, suggesting potential investment strategies.

§ 02 Key Developments

• Verizon has been part of the Dow for 25 years and is being replaced due to weak performance and valuation concerns.
• Historical data shows that out of the last seven Dow changes since 2015, five exiled stocks outperformed their replacements 12 months later.
• Intel, which was replaced by Nvidia in the Dow in 2024, surged from $26.20 to about $132 per share, gaining approximately 400% post-removal.

§ 03 Strategic Context

• The phenomenon known as the "Curse of the Dow" suggests that stocks leaving the index may provide better returns than those entering it, based on historical performance.
• Research indicates that companies removed from major indexes often see a rebound in stock performance due to initial overreactions by investors and depressed valuations.

§ 04 Strategic Implications

• Investors may consider buying stocks being removed from the Dow as they could outperform the incoming stocks over the following periods.
• The trend suggests that companies included in the Dow might face pressure to maintain high valuations, potentially leading to underperformance.

§ 05 Risks & Constraints

• The Dow is a price-weighted index, meaning the impact of lower-priced stocks like Verizon is minimal, which could skew performance metrics.
• There are exceptions to the Dow Curse theory where newly added stocks do not underperform, indicating that past performance may not guarantee future results.

§ 06 Watchlist / Forward Signals

• The performance of Verizon's stock post-exclusion will be closely monitored to see if it follows the historical trend of outperformance.
• The upcoming Dow change on June 29, 2026, will be a key date to observe market reactions and stock performance dynamics for both Verizon and Alphabet.