.png)
Market headlines, globally, have been dominated by the storied performance of a select few transformational, winner-take-all business models.These securities are now household names, even for the kids. At the end of the last decade, this wonder-basket (including companies like Apple, Google, and Microsoft) already commanded a whopping market cap of over $700 billion. Today, with less than four weeks to go in this decade, these “FAMANGs” - which also include Facebook, Amazon, and Netflix - are worth nearly $5 trillion.
The impact of the FAMANGs on S&P returns has been tremendous. At the beginning of the decade, these six names had an aggregate S&P 500 weighting representing just over 6% in the index. Today, it is nearly 17%.
So the big question is this: how well would the S&P 500 index have done without the FAMANGs? In other words, if the FAMANG’s never existed, but instead the capital allocated to these six securities was allocated to the other 494 index securities by their market weights, how would the S&P 500 index have fared this decade? [1]
And here is your answer: We estimate that the FAMANGs – through November 29, 2019 – have contributed about 30% to the ten-year returns of the SPX. In other words, these six names alone represented about 12% of the total returns of a 500 stock index over this decade-to-date.
Those are big numbers, but – and going out on a limb here - we’ll bet at least a few out there thought the impact might have been even higher.
FOOTNOTES
[1] And this is without considering that the (negative) impact that the FAMANGs may have had on any of the other 494 business models in the S&P 500. Surely, without the FAMANGs, some of them might have done much better.
DISCLAIMER
The views and opinions expressed in this post are those of the post’s author and do not necessarily reflect the views of Albert Bridge Capital, or its affiliates. This post has been provided solely for information purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The author makes no representations as to the accuracy or completeness of any information in this post or found by following any link in this post.
YOU MIGHT ALSO LIKE
Are American Companies Better than European Ones?
If we again go back and start the clock on January 1, 1980, and stop it thirty years later on December 31, 2009, we see that the S&P 500 generated annual total returns (with dividends) of 11.5%. During that exact same period, guess what the annual returns of the MSCI Europe were? Also 11.5%. This last decade, however, things have gotten out of whack.
Read MoreArchegos, Disclosure, and Price Discovery
This had a lot to do with bad banking, but most to do with an overzealous client. Meanwhile, it had very little to do with holdings disclosure. Sure, our kneejerk reaction is (always) for more regulation, because we want to believe that some regulatory response will immediately solve all our future problems. But we should question this intuition.
Read MoreInvestors? Possibly you!
FATMAN-G. No, that isn’t my rap name, although vaguely appropriate (I mean, the G part of course). That’s our new moniker for the Avengers[1] of the equity capital markets, to which we have now added Tesla. FATMAN-G is Facebook, Amazon, Tesla, Microsoft, Apple, Netflix, and Google.
Read More
