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For those of you at home keeping score

MarkMark
in Other Investing
by Andrew Bary, Barron's article:

The biggest keep getting bigger and more dominant.

The five technology giants that dominate the S&P 500 index -- Apple ( AAPL ) , Microsoft ( MSFT ) , Alphabet (GOOG), Amazon.com ( AMZN) , and Facebook ( FB ) -- accounted for a combined 22.9% of the index Friday, an apparent record. The data are from S&P Dow Jones Indices.

Three of the tech leaders -- Microsoft ( MSFT ), Alphabet, and Facebook ( FB ) -- hit new highs Friday as the S&P 500 reached a record.

Rarely has the S&P 500 been so concentrated at the top. The Big Five were a combined 21.7% at the end of 2020.
At year-end 2019, the five largest stocks in the index totaled 17.2% of the index. At that time, Berkshire Hathaway (BRK.B) was No. 5., not Facebook ( FB ), which now ranks fifth. At year-end 2018, the top five were 15.4% of the S&P 500 index (Berkshire again was fifth).

It is notable that at the end of 1999, right before the peak in tech stocks, the top five companies were 16.8% of the S&P 500. Those five stocks in order of size were Microsoft ( MSFT ), General Electric (GE), Cisco Systems (CSCO), Walmart (WMT), and Exxon Mobil (XOM). GE, Cisco, and Exxon are now nowhere near the top.

So far this year, Microsoft ( MSFT ) (up 30.2% through Friday), Alphabet (up 57.3% based on the nonvoting shares, GOOG) and Facebook ( FB ) (up 35.4%) are powering the leaders. Apple ( AAPL ) and Amazon ( AMZN ) were up about 12% year-to-date through Friday, behind the S&P 500's 17.5% gain.

Comments

  • Sven
    It is amazing that these FAANG stocks have been dominating the broader US stock index for the last 10 years. Few mutual funds managed to be competitive without holding one or more of the FAANG stocks. They are not consider bad but only from the sake of diversification perspective. Value and smaller cap stock funds have fewer exposure to FAANG stocks. BTW, is BRKB is Value stock ever though it holds 40% Apple stock?

    M*'s X-ray tool reveals stock overlaps between funds and their percentages. I have not able to do that on M* site directly as in that past.
  • rforno

    Take them out of the S&P and see what the rest of the 'market' (er, index) has returned....or not.

    https://www.thestreet.com/trends/news/heres-what-the-s-p-500-looks-like-in-2020-without-big-tech
  • beebee
    edited July 2021
    @rforno,
    From your chart the "Lower 490" look as though they have not even made it back to Jan 2020 levels. Also, I believe historically the "Top Ten" stocks have regularly out weighed and - in good times - out performed the "Lower 490". Isn't that how market cap weight indexes work?

    Market Cap-Weight verses Factor-Weight Indexes:
    Longtime market watcher and Wharton School professor Jeremy Siegel has argued for decades that investors should consider alternatives to popular market cap-weighted funds, particularly ETFs that weigh their holdings based on fundamental factors such as earnings growth, dividends or momentum.

    Now, that tide is slowly turning. Though market cap-weighted funds are still the most widely held in the $5 trillion ETF market, issuers are growing increasingly comfortable offering factor-weighted and other niche products.
    market-cap-vs-fundamentals-etf-weighting-and-the-average-investor
  • rforno
    bee said:

    @rforno, did you see the rest of the S&P 500 playing catch up. From your chart they look as though they have not even made it back to Jan2020 levels. Also, I believe historically the "Top Ten" stocks have regularly out performed the "Bottom 490".

    Isn't that how market cap weight indexes work?

    Yep, totally. I just posted that as a reminder to all that the S&P index =! "the market" and not necessarily reflective of reality or 'main street economics.'
  • sma3
    There are a lot of financial advisors and investment professionals ( other than those that run active non Large Cap funds) who have been riding this wave claiming that they are geniuses at investment. Wonder what will happen when the music stops
  • Derf
    It would be nice to know what inning we're in ?!
    Stay Kool, Derf
  • Sven
    The market is distorted with Fed and others government reserves involve in of the market. It is unclear where things are.
  • catch22catch22
    I recall the "dot.com" unwind clearly. The "psuedo" tech. wanna-be's of that period were seriously overpriced and hoping to provide a profit. Bon Jovi, Wing and a Prayer, flyers. Many were not the mature tech. organizations of today.
    Anyway, I placed Fido's Over the Counter fund for a view compared to the whatever the composition of SPY may have been at the time. I dug through old paper documents, but could not find any info for the top 10 holdings of FOCPX at the beginning of 2000.
    The chart shows the story in the high pricing and the steep drop. You will also note moving across the chart, the time frames for recovery periods. And 2008 was just around the corner.

    FOCPX versus SPY January 2000 - 2007
  • msf
    edited July 2021
    I modified catch's charts to include "the market", VTSMX. In the context of investing, that pretty much is the market, and its performance over the past decade has not been much different from that of the S&P 500.

    Granted that investing, finance, business, and the economy are all different, so depending on the context, 'S&P index =! "the market"'.

    FOCPX, SPY,VTSMX January 2000 - present

    From the FOCPX semi-annual report dated January 31, 2000: 
    TOP TEN STOCKS AS OF JANUARY
    31, 2000

                                   % OF FUND'S  NET ASSETS  % OF FUND'S NET ASSETS  6
                                                            MONTHS AGO

    Microsoft Corp.                 9.7                      8.8

    Cisco Systems, Inc.             5.3                      2.7

    Amgen, Inc.                     3.6                      3.7

    Intel Corp.                     3.0                      1.2

    Dell Computer Corp.             2.5                      0.5

    BEA Systems, Inc.               2.3                      0.0

    Immunex Corp.                   2.3                      1.4

    EMC Corp.                       1.9                      0.0

    Telefonaktiebolaget LM          1.9                      0.2
    Ericsson sponsored ADR

    Comverse Technology, Inc.       1.7                      1.8

                                    34.2                     20.3

  • catch22catch22
    @msf
    Thank you for the FOCPX data. I'm aware of EDGAR within the SEC; but have not used the site.
  • davidrmorandavidrmoran
    Derf said:

    It would be nice to know what inning we're in ?!
    Stay Kool, Derf

    not sure this is an answer but figured it would be of interest

    https://www.nytimes.com/2021/07/29/upshot/economy-gdp-analysis.html
  • teapot
    How much S & P earnings come from the top 10? Is that percentage bigger than their market weight?
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