When it comes to the performance measurement of the stock market, the S&P 500 is considered to be one of the most widely followed and accepted benchmarks. The interesting thing about the S&P 500 is that it is a market cap based index, i.e. the bigger the company the more influence it has on the index.
The top 10 holdings in the S&P 500 account for almost 20% of the weighting in the index – the top 10 names are:
Exxon Mobil |
Microsoft Corp |
Wal-Mart Stores |
Google Inc’A’ |
Apple Inc |
Johnson & Johnson |
Procter & Gamble |
Intl Bus. Machines |
AT&T Inc |
JPMorgan Chase & Co |
As a matter of fact the top 38 issues account for 50% of the weighting in the S&P 500. That means 462 companies account for the rest – perhaps it should be called the S&P 50… oh wait we already have the Dow Jones 30, couldn’t have two indexes too similar, how would the publishers differentiate themselves.
If we were to take a look at performance of the S&P 500 – the top 10 stocks that have attributed the most return to the S&P 500, you would expect in a market cap weighted index that they would be some of the largest names. Low and behold 5 of the names are the same, with the other 5 names in the top 20.
Google Inc’A’ |
Genl Electric |
Berkshire Hathaway’B’ |
Procter & Gamble |
JPMorgan Chase & Co |
Chevron Corp |
Pfizer, Inc |
Johnson & Johnson |
Exxon Mobil |
Philip Morris Intl |
Now I wonder what the overlap is for the top year to date performers in the S&P 500:
Constellation Brands’A’ |
Safeway Inc |
Hewlett-Packard |
Heinz (H.J.) |
Sealed Air |
Cabot Oil & Gas |
Tesoro Corp |
Avon Products |
Computer Sciences |
Range Resources |
Whoops there isn’t any.
Now the risk you take as an asset manager is that if you are being benchmarked against the S&P 500 – you better own the top handful of names – you can’t afford to be wrong on your own.
However, if you are looking for some businesses that seem to be doing well in a turbulent economic environment, perhaps looking into the index data could become a fertile ground for stock selection.
This post wasn’t to disparage the use of the S&P 500 as a benchmark or an investment vehicle but to highlight the fact that with a little bit of “scratching” a lot of data can appear.
That’s it from me and bye for now.
*All index data mentioned here was sourced from:
http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf–p-us-l–