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Like Dow, ASM Fund shifts blue-chip stocks

The Dow Jones Industrial Average went through a shake-up last week _ and so did the ASM Fund, the Tampa-based mutual fund that invests by tracking the Dow.

Dow Jones & Co. replaced four of the 30 stocks in its blue-chip index last Monday3-17, putting greater emphasis on technology, health care and financial services.

ASM manager Steven H. Adler says the changes are positive, even though the fund had to spend about $2,000 in commissions to revamp its portfolio. ASM's policy is to hold equal numbers of shares of each of the 30 Dow companies.

Dow Jones dumped Bethlehem Steel Corp., Texaco Inc., Westinghouse Electric Corp. and Woolworth Corp. The new members of the elite fraternity are Hewlett-Packard Co., Johnson & Johnson, Travelers Group Inc. and Wal-Mart Stores Inc.

"Bethlehem's been having trouble getting out of its own way, and with three oil companies in the Dow, I don't mind going to two," Adler said.

"Woolworth, although it had a good year last year, is just not an exciting company any more." Westinghouse is being removed because it is splitting into two companies.

The new companies are all leaders in their respective industries. Wal-Mart is the world's largest retailer, Johnson & Johnson makes drugs and computer products, Hewlett-Packard is the No. 2 computer company and Travelers is a giant in financial services.

The Dow has been updated many times over the years to keep pace with changes in the U.S. economy. Only one stock in today's Dow _ General Electric Co. _ was part of the original 12-stock Dow index that made its debut a century ago. It became a 30-stock index in 1928.

Until last week, the newest members of the index were Walt Disney Co., Caterpillar Inc. and J.P. Morgan & Co., all of which joined in 1991.

The formula for calculating the index is adjusted each time changes are made or one of the Dow stocks splits. Now, a $1 change in one of the Dow stocks produces a three-point change in the index.

Some people think the Dow itself might split in the future, to a number half or even a 10th the value of the current Dow. The result would be a less volatile index.

Adler says the Dow companies are a low-risk way to invest _ if you define risk the way he does.

"I think it's a function of information," he said. "The more you know about something, the better the position you are in to evaluate it and determine if it's consistent with your own goals. The big companies in the Dow offer more information and greater predictability of earnings."

The Dow at a glance

WHAT:

Dow Jones industrial average.

HISTORY:

Started by Charles Henry Dow, co-founder of Dow Jones & Co., on May 26, 1896, the original index comprised 12 industrial companies. The Dow became a 30-stock index on Oct. 1, 1928.

COMPANIES:

Two-thirds of the stocks that were part of the index in 1928 have dropped out. Editors at the Wall Street Journal decide which companies to include. Recent changes have shifted the index more toward service businesses to reflect changes in the economy.

RIVALS:

The Standard & Poor's 500 Index, comprising 500 stocks, is the most prominent. There are a variety of other indexes that attempt to reflect the broader U.S. stock markets, narrow business segments, stocks traded on major exchanges, small stocks and foreign stocks.

The Dow is a "price-weighted" index, meaning the higher the price per share, the bigger the stock's influence on the Dow. Here's a look at the 30 stocks and their weightings, as of Friday's close:

IBM 5.87%

Philip Morris 5.41%

Procter & Gamble 4.95%

DuPont 4.92%

J.P. Morgan 4.70%

Boeing 4.66%

General Electric 4.59%

Exxon 4.56%

Merck & Co. 4.04%

3M 3.87%

Eastman Kodak 3.60%

Caterpillar 3.48%

Walt Disney 3.42%

Alcoa 3.29%

United Technologies 3.26%

Allied Signal 3.20%

Chevron 3.07%

American Express 2.88%

Coca-Cola 2.66%

Johnson & Johnson 2.53%

General Motors 2.52%

Hewlett-Packard 2.51%

Sears Roebuck 2.42%

Goodyear Tire 2.38%

Travelers Group 2.25%

Union Carbide 2.09%

McDonald's 2.09%

International Paper 1.86%

AT&T 1.53%

Wal-Mart 1.33%

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