The 'Dow curse' now favors Verizon over Alphabet
Verizon Communications is being booted from the Dow Jones Industrial Average to make way for tech-giant Alphabet.
If you don't believe in the "Dow curse," look at what happened to Nvidia (NVDA) after it was added to the Dow Jones Industrial Average DJIA in November 2024.
Nvidia had been one of the U.S. market's best-performing stocks. Five months after it became one of the 30 Dow components, Nvidia shares had lost 40%.
Though it has since recovered, Nvidia's cumulative share-price performance since being added to the Dow actually lags the tech-heavy Invesco QQQ ETF QQQ, for example - by 3 percentage points, annualized.
In contrast, getting booted from the Dow turned out to be lucrative for Intel $(INTC)$ investors. The stock was removed from the Dow to make room for Nvidia. Since then, it has delivered an annualized return of about 170%.
Some have speculated that Nvidia's disappointing performance is somehow related to the Dow not being a friendly place for tech stocks. But nontech stocks have suffered similar fates.
Take Sherwin-Williams $(SHW)$, which was added to the Dow at the same time as Nvidia. Since then, the paint company's stock has lost about 9% annualized, according to LSEG. Or look at biotechnology giant Amgen $(AMGN)$ and industrial stalwart Honeywell $(HON)$, which were added to the Dow in August 2020. Since then, both of these stocks have lagged the S&P 500 SPX by 9.5 annualized percentage points on average.
Perhaps the most spectacular example of the Dow curse came after the decision to remove IBM $(IBM)$ from the index in 1939; the stock wasn't added back until 1979. Over those four decades, shares of AT&T $(T)$ - the company that replaced IBM in the Dow - were mostly flat, while IBM's stock soared.
These results are in line with what contrarian analysts expect from this index reshuffling. Companies are typically deleted from the Dow (or any index, for that matter) after their shares have suffered a lengthy period of market-lagging performance, while the added companies are typically riding a wave of popularity. Betting on deleted Dow stocks over new ones is a contrarian bet on regression to the mean.
Verizon's new horizon
Consider Alphabet $(GOOG)$ $(GOOGL)$ and Verizon Communications $(VZ)$. Tech giant Alphabet is being added to the Dow at the end of this month, while Verizon Communications is being deleted. The chart above shows the performance gap between the two: Verizon's return over the past 12 months, including dividends and after inflation, is about 11%. Meanwhile, Alphabet's total inflation-adjusted return is more than 100%.
This contrarian lesson suggests that there is nothing unique about the Dow's deletions outperforming its additions. That's exactly what researchers have found. One study by Wharton University finance professor Jeremy Siegel analyzed additions and deletions to the S&P 500 from its inception in 1957 to the end of 2003, finding that the average deletion outperformed the average addition.
Another study, by Jie Cai of Drexel University and Todd Houge of the University of Iowa, analyzed additions and deletions to the Russell 2000 RUT from 1979 through 2004. It, too, found that the average deletion outperformed the average addition.
The bottom line? Gutsy contrarian investors should now be more interested in Verizon Communications, given that it's being kicked out of the Dow, and more wary about Alphabet.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
-Mark Hulbert
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(END) Dow Jones Newswires
June 26, 2026 16:02 ET (20:02 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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