Dow Departure Strategy: Why Verizon May Outperform Alphabet Despite Index Exit
Verizon’s exit from the Dow Jones Industrial Average on June 29, 2026, will mark the end of a 25-year tenure, replaced by Alphabet to reflect advancements in artificial intelligence, cloud computing, and digital advertising. However, historical patterns suggest this transition may favor the departing stock.
Known as the “Dow curse,” a phenomenon exists where companies removed from the index often outperform those added. Analysis of the last seven Dow changes since 2015 reveals that five exiled companies outperformed their replacements within 12 months, with most deliveries by substantial margins.
Verizon’s 7.5% gain over the past year contrasts sharply with Alphabet’s 100% surge, while the Dow itself rose over 20%. Companies entering the Dow typically reflect elevated valuations and strong growth momentum, potentially limiting future returns. Conversely, removals often stem from weakened performance and reduced valuations, creating opportunities for recovery.
A notable example occurred in 2024 when Nvidia replaced Intel. Intel’s stock subsequently surged approximately 400% from $26.20 to $132 per share, significantly outpacing Nvidia’s rise to $200 from $147. This performance suggests index removal doesn’t necessarily signal continued decline, particularly for fundamentally challenged companies.
Research supports this trend. A 2008 study examining 50 changes since 1928 found that removed stocks often outperform expectations as investors initially overreact to deletions. Similarly, a 2013 analysis of S&P 500 changes from 1962-2003 revealed that deleted stocks consistently outperformed additions over the long term.
The Dow’s price-weighted structure further diminishes the impact of low-priced stocks like Verizon, which contributed barely half a percentage point to the index. This structural characteristic may inadvertently benefit departing companies as they re-allocate investor attention and resources away from index-tracking pressures.
Whether the Dow curse persists with this latest transition remains to be seen, but the weight of historical evidence suggests Verizon’s exit could prove advantageous for shareholders.
