Getting Dropped From the Dow May Be a Hidden Buy Signal
Stocks removed from the Dow Jones Industrial Average often outperform afterward. The so-called 'Dow curse' now points to Verizon over Alphabet.
Wall Street has long obsessed over which stocks earn a coveted spot in the Dow Jones Industrial Average, but a contrarian pattern suggests investors should pay closer attention to the names getting kicked out. History shows that stocks removed from the blue-chip index frequently outperform their replacements — a phenomenon traders have dubbed the "Dow curse."
The logic behind the trend is straightforward: companies are typically dropped from the Dow after a prolonged stretch of underperformance, meaning their valuations have already absorbed years of bad news. When a stock is replaced, the flood of index-fund selling that follows the removal can push the price even lower, creating an attractive entry point for patient investors willing to look past the headline embarrassment of losing Dow membership.
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The dynamic is now squarely focused on Verizon and Alphabet following the latest reshuffle. According to MarketWatch, the "Dow curse" currently favors Verizon over Alphabet — suggesting the telecom giant, despite its struggles, may carry more upside potential in the near term than the Google parent that took its place in the prestigious 30-stock average.
For retail investors, the pattern offers a broader lesson about index-driven price distortions. Passive fund flows have grown powerful enough to create mispricings when index compositions change, and savvy active investors have historically exploited those windows. Getting removed from the Dow is no longer just a scarlet letter — for the right stock, it can be a contrarian catalyst worth watching closely.
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