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Bank of America to be dropped from the Dow

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Come next week, America’s most famous list of blue-chip stocks will no longer include Bank of America.

The company that runs the Dow Jones Industrial Average announced Tuesday that the Charlotte bank would no longer be included after the biggest shake-up of the list in nine years. In its place will be New York investment bank Goldman Sachs.

Computer maker Hewlett-Packard and aluminum firm Alcoa are also getting the boot, in favor of Visa and Nike. The three companies deleted have the lowest stock prices of the 30 companies on the list.

Being dropped from the list isn’t expected to have any meaningful effect, investment managers say. And after all, there are plenty of well-regarded banks not on the list – Wells Fargo, for instance.

But the decision to drop Bank of America reflects the bank’s roller-coaster ride since it joined the list.

Dow Jones added Bank of America to the average in February 2008 in an effort to increase the representation of financial companies. At the time, the stock was trading at $42.14.

The financial crisis and its aftermath dramatically diminished the stock’s value, as Bank of America found itself laden with legal liability primarily from its acquisition of subprime lender Countrywide Financial Corp. At one point in 2009, shares traded near $3.

In 2011, Bank of America was the worst performer in the Dow Jones Industrial Average, falling 58 percent. The next year, the bank was the best in the index – up more than 108 percent.

In a statement Tuesday, Bank of America pointed out that it was outperforming the average again this year.

“This decision has no impact on our business or our strategy for providing solid returns to shareholders,” spokesman Jerry Dubrowski wrote in a statement from the bank. “We will continue to focus on building capital and liquidity and sharpening our focus on serving our customers and clients.”

Investors did not appear rattled by the news Tuesday. Bank of America shares closed up just less than 1 percent, at $14.61. Investment managers said they do not anticipate the move having a long-term effect on the bank.

Though the Dow average is by far the most cited measure of the stock market in the public, it is not very influential among investors.

“The consensus is that it’s not going to make a big difference in their stock price,” said Don Olmstead, managing director of Novare Capital Management in Charlotte. He said very few institutional investors look to line up their portfolios with the Dow index. Instead, they use a broader measure such as the Standard & Poor’s 500, which tracks more stocks.

While there may be some loss of prestige in dropping from the best-known index, Olmstead said there shouldn’t be any major difference in how frequently the stock is traded or how it performs.

“Bank of America is such a big company and widely held, so it won’t have much of an impact long-term,” said Brian Rudisill, senior vice president at Novare Capital.

Dunn: 704-358-5235 Twitter: @andrew_dunn
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