Getting Dropped From the Dow May Be a Hidden Buy Signal
History shows stocks removed from the Dow Jones Industrial Average often outperform afterward. Verizon may now benefit from this 'Dow curse' pattern.
Wall Street has long tracked which companies earn a spot in the Dow Jones Industrial Average, but a contrarian pattern suggests the real opportunity lies with the stocks getting kicked out. Known informally as the "Dow curse," the phenomenon describes a tendency for removed stocks to outperform the index and their replacements in the months and years following their ejection.
The latest twist in this ongoing story pits Verizon against Alphabet. Alphabet was added to the prestigious 30-stock index while Verizon was shown the door — a move that, based on historical precedent, could actually favor the ousted telecom giant. The logic is rooted in the mechanics of index rebalancing: stocks are typically removed after a prolonged period of underperformance, meaning they may already be near a valuation floor at the moment of exclusion.
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The Dow curse works in part because index inclusion and exclusion decisions are often made at peak sentiment — committees tend to add hot stocks near their highs and cut laggards near their lows. That dynamic creates a structural buy signal for patient, value-oriented investors willing to bet against the crowd at exactly the moment Wall Street is turning its back on a name.
For Verizon, the removal arrives amid broader pressure on legacy telecom business models, but the company retains significant free cash flow and a dividend yield that income investors find difficult to ignore. Whether the Dow curse holds this cycle remains to be seen, but the pattern has repeated itself often enough that contrarian traders are already paying close attention to how Verizon trades in the coming quarters relative to Alphabet's index debut.
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