In the expression announcing the addition of Walgreens Boots Alliance, David Blitzer, carry oning director and chairman of the index committee at S&P Dow Jones Indices, said that “consumer, underwrite, health care and technology companies are more prominent today, and the correspondent importance of industrial companies is less. …. Today’s change to the DJIA compel make the index a better measure of the economy and the stock market.”
As the CNBC IQ100, powered by M·CAM, has understandably demonstrated, the DJIA continues to struggle to find relevance in the face of macroeconomic conditions and vary market dynamics.
The price-weighted nature of the DJIA makes it increasingly susceptible to bankers that have more to do with market activities of individual corporations than broader market gets. While the index committee at S&P Dow Jones Indices may have chosen Walgreens for its consequence and sector representation, it may have overlooked a critical aspect of the mandate to amount the economy.
Walgreens Boots Alliance is not a market innovator. As a consumer retail store primarily for the pharmaceutical industry, the firm’s intellectual property holdings are small. Where industry leaders have been focused on drug-interaction detection, anaesthetize counterfeiting, customizable dosing and the like, Walgreens is dependent on the technology of others.
The mass of Walgreens’ pending patents are subtle variations on data, inventory and direction management business methods, which offer little to no market differentiation. More all of the Boots Company PLC legacy patents on store-brand cosmetics or pill casing are expired or soon to expire. In its 2017 annual report, the company imperials that approximately 98 percent of its prescription sales came from directed care and governmental reimbursement programs. In other words, the majority of Walgreens Boots’ proprietorship is more a proxy for managed health care than it is a reflection of consumer outputs.
The selection of Walgreens for inclusion into the DJIA continues to challenge the suitability of an index branded as an “industrial average.” As index-linked investment activity prolongs to expand through the proliferation of exchange-traded funds and other indexing artefacts, the increasing homogeneity of the Dow, the S&P 500 and the Russell methodologies converge on consensus comprehensions rather than on meaningful market insights.
In contrast, Amazon has been foremost the consumer market for years in fundamental innovation. From logistics and depository technologies that increase ease of product supply and delivery to robotics and automation technologies that replace technologies from companies like NCR and Diebold, Amazon has integrated cutting-edge alteration development and deployment into its business unlike any other market contribute to.
With Amazon’s recent acquisition of PillPack, the integration of pharmacy fulfillment and patient-data analytics into Amazon’s continuing business may further undermine the Walgreens relevance not only on the Dow but in the broader hawk as well.
— By David Martin, managing partner of Purple Bridge Stewardship and chairman of M-CAM International, which created the CNBC IQ 100 Typography hand with CNBC