Just These Five Companies Account For 28% Of The S&P's 2017 Returns

Tyler Durden's picture

On the last day of the busiest earnings week in a decade, here is a striking statistic from Goldman Sachs, showing just how dominant a handful of large cap companies have become in terms of both overall profitability and market impact:

Year to date the top 10 contributors have combined to account for 37% of the S&P 500 index return (more than double their market cap representation of 17%). The concentration among the top five is even greater, with those firms – AAPL, FB, AMZN, GOOGL, and MSFT – accounting for 28% of the return and 12% of market cap.

 

Some further perspective, courtesy of the WSJ, which notes that the combined market capitalization of AMZN, MSFT, INTC and GOOG makes up about 8% of the Index’s total.

Throwing in Apple and Facebook puts about 13% of the S&P 500’s combined market cap into the hands of just six companies. This wasn’t always the case. Ten years ago, Apple, Amazon, Google, Microsoft and Intel made up just 5% of the S&P 500’s market cap, while Facebook was four years away from becoming a public company.

Can this tremendous tech rally persist? The WSJ's take:

The newfound prominence of big tech companies now can be chalked up to a few factors. One is that most big tech companies are profit machines—unlike many of their smaller peers that are still losing money. Alphabet, Microsoft, Intel and Amazon reported a combined $16.8 billion in operating income for the March quarter on Thursday. That is about 7% of the total projected for the S&P 500. Amazon looks like an outlier with a rather thin operating margin of 2.8% for the quarter, but even that is a notable gain from its average of just 1.5% over the last five years.

 

But the other, even bigger factor is that demand for technology products and services keeps increasing, even as some market segments like PCs have declined. That has allowed several big tech companies to pivot into new segments with the help of strong cash flows generated by their original businesses. Amazon, Microsoft and Google have built large cloud services used by businesses shifting from more traditional computing setups.

 

Those efforts are still relatively young. Revenue from Amazon’s AWS cloud business surged 43% to $3.7 billion for the March quarter, but is still only about 10% of the company’s overall business. The segment of Alphabet that includes Google Cloud saw revenue jump 49% year over year, but is only about 1% of the company’s total. That leaves a lot of potential upside for a small group of big players that already have demonstrated that scale matters.

Perhaps these megacaps should also dedicate a substantial portion of their cash to a simpler project: defense against monopoly accusations, because this is certainly not the first time in US history when just a handful of companies have dominated the overall market. And with AAPL, AMZN and GOOGL all racing to be the world's first trillion dollar company, it won't be the last either.

In the meantime however, the big question is how long until Jeff Bezos surpasses Bill Gates as the world's richest man. At this rate, less than a week of buying in AMZN shares should be sufficient.

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jamesmmu's picture
The Art of the Deal: Wall Street Deals Explode Since January 20th

http://investmentwatchblog.com/the-art-of-the-deal-wall-street-deals-exp...

BigFatUglyBubble's picture

What's a good search engine to use besides google and bing?

Rich Stoehner's picture

The yellow pages in back of the phone book

BigFatUglyBubble's picture

Why does yellow have to be in the back?

Das Rayciss

A. Boaty's picture

A search engine called DuckDuckGo should do the job.

sinbad2's picture

By not using Google you can actually reduce your data usage. When you click on a link in Google, it doesn't take you to the link, but to the Google server, which then takes you to the link. They do this so they can target advertising to you personally.

They track your IP and build up a portfolio on you, now if a Government agency was to track you so closely, it would be called spying.

Rabbi Chaim Cohen's picture

IXQUICK Startpage or Duck Duck Go. But both use Google search tech under the hood. (There's a reason Google rules the roost) These two just don't load any tracking tools on your browser.

It's worth noting that IXQUICK Startpage will also act as a web proxy for your machine for you if you'd like, so your IP isn't compromised while hitting a particular site. Just select "Proxy" above the search result.

yogibear's picture

As they say, this bubble needs to be larger than the last DOT COM bubble. So everyone jump on until it becomes larger.

PE's should be sky-high.

overmedicatedundersexed's picture

why do I think free fiat is pushed into select companies - giving them an unbeatable advantage over those who are not in the club??..google and  it's cia/nsa investors with your so called fiat, fed ju bucks??

"it's a big club and you and I are not in it.".is the most important sentence of the last 100 years..

 

Arnold's picture

"...most big tech companies are profit machines—unlike many of their smaller peers that are still losing money. "

Ummm... no.
Cash churn and burn.
Profit? that's for old school accounting practice.

charlie303's picture
charlie303 (not verified) Apr 28, 2017 6:47 AM

I remember watching Google co-founder Sergey Brin have his little temper tantrum protest at Trump's immigration ban.
Brin was 6 years old when he fled Soviet Russia with his family and came to the US as a refugee.

All those Ted Talks, Google searches, big data, algorithms and open office pc multi cultural workspaces and what was the result?
Garbage In Garbage Out!
Sorry Madam President Clinton we failed you and we don't know why.

The JEW believes him/herself to be THE Chosen People.
They were once, but they lost the Covenant (promise) with Yahweh, probably through a love of money or self or some such.
And now the JEW roams the earth looking to regain the Covenant.
The JEW was A Chosen Race, not THE Chosen Race.
How could the Aboriginal Australian roam the outback desert for 30,000 years if not enabled by Divine Will through the dreamtime?

I believe America was Chosen to bring the Spiritual Principle of Freedom to the World.
The JEW Brin and the JEW Zuckerberg of Facebook have perverted this drive by agreeing to censor internet Freedom in China and by using their vast resources to try and control the minds of the population in favour of a Progressive Liberal agenda.
The JEW finances the Deep State and believes he is right to take his/her cut because only he/she are THE Chosen people and the gentile is chattel.
Are the Deep State keeping oil below $50 to send a meassage to Russia : 'we can degrade you economically'?
The JEW enables this through his money changing, he will take his share of the spoils before the market is allowed to discover price ($52 IMO).

The JEW will not find the Covenant through stealth or corruption!
Were the 6 million who were slaughtered by Hitler Karmic repayment for the JEWs deceit through All ages?

I wish the JEW well!
I hope they find The Covenant and the Peace and Love they so desperately miss!
Then we can all realise that we are God's children.

Obadiah's picture

Don't forget about those that SAY they are Jews BUT ARE NOT and DO LIE

 

Revelations 3

9 Behold, I will make them of the synagogue of Satan, which say they are Jews, and are not, but do lie; behold, I will make them to come and worship before thy feet, and to know that I have loved thee.

Here let a Ex Marine read it to you

https://youtu.be/OsETpgkv_Sk?list=PLyLJVvk8AvtCgcD8JkutVqOjairB9JpPn&t=8...
charlie303's picture
charlie303 (not verified) Apr 28, 2017 6:45 AM

FaceBook is FAKE!
I'm calling a 25% drop in share price by Jan 01 2019.
And no big data algorithm will explain to them why.
Those the Gods seek to destroy, first they make mad.

JRobby's picture

Who would have thought?

(Laugh Track Deafening !!!)

HalEPeno's picture

Pareto distribution?

Consuelo's picture

 

 

Imagine that.   A hand-held device to make a phone call (I mean, show what came outta yer bunghole last night) holds all the cards...   Well, at least it is something tangible that had to be manufatured - albeit, overseas - right...?