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5 Stocks That Should Join the Dow

Kraft, Alcoa and HPQ all could be in line for the heave-ho

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Amazon AMZN

My methodology was to look at Dow 30 stocks and wrap my head around what segment of the market is underserved in the list based on the our current American economy, and to pick the leading company in that sector. What I came up with is that retailing is decidedly underrepresented in the Dow Jones Industrial Average — and as such, (NASDAQ:AMZN) is the natural choice.

Amazon has redefined retail and proven the power of e-commerce. It has decidedly blown up the old publishing business model, and it currently is gutting brick-and-mortar electronics and entertainment stores like Best Buy (NYSE:BBY).

AMZN is worth a stunning $97 billion — bigger than even Kraft’s current $67 billion — and unlike fading Dow tech stock Hewlett-Packard (NYSE:HPQ), it’s clearly part of the new American economy in a digital age. In fact, it’s one of the 30 largest U.S. companies overall by market cap.

You might scoff at this because of Amazon’s admittedly high price-to-earnings ratio. Well, consider that Amazon did $48 billion in revenue for fiscal 2011 and is forecast to bring in more than $63 billion in fiscal 2012. In 2011, the combined operations of Kraft did about $55 billion. Even if the company were to lose some share price, its sales are very real.

And sales are the story here. Dollars spent via retailing are an important indicator of the stock market and the economy, and there truly is no better indicator of retail in 2012 than Amazon.

The only big hurdle is the the price weighting of the index and the $215 share price as a disruptor of the Dow’s current system. But frankly, Amazon has changed the rules since it’s creation so why stop now?

— Me (InvestorPlace editor Jeff Reeves, that is)

Article printed from InvestorPlace Media,

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