Mondelez International Inc (MDLZ), Kraft Foods Group Inc (KRFT): How the Dow Jones Industrial Average (.DJI)’s Recent Rejects Have Fared

During the most recent round of stress tests, Citigroup Inc (NYSE:C) passed with flying colors, greatly improving on its capital ratios since last year’s tests. It even managed to best Bank of America Corp (NYSE:BAC) in terms of potential impact on net income in the Federal Reserve’s economic Armageddon scenario. As a sign of its long-term commitment to keeping itself in a healthy capital position, Citi even chose not to seek a dividend increase this year, instead choosing to stay on its recovery path. That dedication to long-term performance bodes well for the bank going forward, and even given Bank of America’s equally impressive financial recovery, it should make you question whether the Dow made the wisest choice in allowing Bank of America Corp (NYSE:BAC) to stay, rather than Citi.

Don’t forget
When a company leaves the Dow Jones Industrial Average (INDEXDJX:.DJI), the first question you should ask is why. In some cases, as with Kraft, the reasoning really doesn’t have much to do with the stock’s future potential. In others, like General Motors Company (NYSE:GM), the damage has already been done and the lack of future prospects for investors is obvious. But if you simply follow the Dow’s decisions and dump a stock from your portfolio when it leaves the index, you could end up missing out on a big profit opportunity.

The article How the Dow’s Recent Rejects Have Fared originally appeared on Fool.com is written by Dan Caplinger.

Fool contributor Dan Caplinger owns warrants on Bank of America. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends General Motors. The Motley Fool owns shares of Bank of America and Citigroup.

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