Just These Ten Companies Account For Half % Of The S&P's 2017 Returns

Tyler Durden's picture

Two weeks ago - as of April 28 - we presented readers with a striking statistic from Goldman Sachs, showing just how much breadth in the market has collapsed and 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



Fast forward less than two weeks later when the breakdown has shifted even more dramatically, and according to the latest breakdown from Goldman, as of May 10, just 10 companies are responsible for half, or 46% to be exact, of the entire S&P's rally YTD.

The common theme? Most of these companies are tech sector names, which probably brings up memories of the first tech bubble, and leads to the next question: 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.

As we said two weeks ago, perhaps these megacaps should also dedicate a substantial portion of their cash to a simpler project: defense against monopoly allegations, 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.

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LawsofPhysics's picture

So I placed some good bets...

Hey, call it what it is, and as far as I can tell the Fed's casino is still open!!!

ejmoosa's picture

Awesome for your bets.  The Fed Casino has now easily identified which of the 500 companies that they need to buy, and they can ignore the rest.

That's the danger of the weighted average, isn't it?  Too bad the SP 500 is not weighted on GAAP earnings instead.

spanish inquisition's picture

It's a casino where the house gets to change the rules mid game.

spastic_colon's picture

please please please ZH DO NOT say anything about the stock indexes being down for at least 90 days................

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Stuck on Zero's picture

It's Pareto all the way to the moon.

LawsofPhysics's picture

GAAP indeed...

"mark to fantasy" forever!!!!

Buck Johnson's picture

This is going to end badly just l ike 2000.



NoDebt's picture

Making money in the stock market is very simple.  Only buy the companies whose stocks go up.  

Ricki13th's picture

Who care about a weak shit economy when you can buy Google, Amazon, Apple, and Microsoft stocks in virtual reality.

NoDebt's picture

1999:  We're all going to get rich selling shit to eachother on the internet.

2007:  We're all going to get rich selling our houses to eachother.

2017:  We're all going to get rich selling stocks to eachother.


small axe's picture

2018: We're all going to live in the same homeless camp off the interstate

Falling Down's picture

Phillip Morris is the only one I have out of those.

Just crash this shit, already.

ejmoosa's picture

Phillip Morris: Consumer Staple?  Now that is funny.

I am Jobe's picture

America is full of choices- Brainwashed Nation 

cherry picker's picture

If that Anonymous were any good it would just format the first five companies to non existence.

Would be interesting to see what comes after.  No bombs, WMDs, threats, just wipe them out with HRC's cloth she used to wipe her mail server.  Market would finally do what it was supposed to do, crash and people may find jobs again as Cortana will have died.

Just think, we may get some freedom back. 

hooligan2009's picture

these companies post a systemic threat to the US economy and the health of the stock market.

they should be broken up before they become TBTF

just the tip's picture

anyone who has read the transcripts of standard oil's breakup, and grasps the responses of rockefeller to the questions that were asked, will see a similarity to the same questions asked of bill gates as to why MSFT should not be broken up.  the quesions and answers are eerily similar.  the results are night and day, that was pre-1913, and gates isn't zionist.

oh, wait.

0Theorem's picture

They are TBTF. Hence, the Fascist state.

Deep Snorkeler's picture

Our American way of life is not sustainable

because the ecological basis and economic structure

are degenerating rapidly.

Mega corporations have already merged

with the federal government.

Do you have persistent feelings of dread?

0Theorem's picture

MegaCorporations + (merge) with State = Fascism. 

Deep Snorkeler's picture

I play saxophone at Weimar Kabarett.

Kat Daddy's picture

All these tech companies are part of the surveillance state and are in bed with the government, therefore, they will enjoy support from the stock buying agent of the USA, the FED.