Shares of Seagate Technology (STX) are down over 17% today after the company reported better than expected EPS but came up short on the revenue and guidance front.  Recently, the first quarter hasn’t been a particularly positive period for STX as the day after last year’s Q1 report it dropped 19%.  While the negative reaction to this morning’s earnings report from STX seems excessive, part of the outsize reaction may be due to the fact that heading into the report, the stock appeared to be on the verge of a technical breakout above its highs from March.  For a lot of chart watchers out there, that breakout heading into earnings probably sucked them into the stock on the long side.

Following the disappointing result, though, those traders that were looking for a short-term rally on a breakout have likely rushed for the exits.  As it stands now, shares of STX are currently testing support just below $42 — representing the highs from December and the opening level from the gap higher after Q1 earnings.  When it comes to chart reading, what a difference a day makes

The five largest stocks in the US equity market are now Technology stocks, and together they make up more than $2.75 TRILLION in market cap.  (While Amazon.com’s official sector categorization is Consumer Discretionary, we consider it Tech first and foremost.)

Below is a list of the 25 largest S&P 500 stocks (through 4/25/17).  The top five are highlighted in yellow — Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN), and Facebook (FB).  It wasn’t long ago that Exxon Mobil (XOM) was the largest stock in the world, and prior to that, it was General Electric (GE).  Now XOM ranks 7th and GE ranks 11th.  Brick-and-mortar behemoth Wal-Mart (WMT) also used to rank in the top three, but it has slipped all the way down to 15th with a market cap that’s just over half the size of online competitor Amazon.com.

We thought we’d take a look at historical valuations for the five largest stocks in the S&P 500 using trailing 12-month P/E ratios.

As shown below, Apple used to trade much more like a “growth” stock prior to the Financial Crisis.  During the current bull market, though, Apple’s average P/E has been 15 — which is more in-line with where a value stock trades.  At 17.25x trailing 12-month earnings at the moment, Apple’s valuation is above its bull market average but not excessively so.

Alphabet’s (formerly Google) earnings have been growing nicely since the start of 2016, as its P/E is down even though its price is up sharply.  Alphabet’s average trailing 12-month P/E over the last 10 years has been 28.83, and its P/E right now is just above that at 31.4.

Microsoft’s trailing 12-month P/E has been rising sharply along with its stock price over the last seven years.  While the stock was considered “dead money” for much of the 2000s after its 1990s heyday, its re-invention in the cloud computing space has turned it back into a “growth” stock that now trades with a higher valuation.  While stocks like Alphabet and Apple currently have P/Es that are just a blip above their 10-year averages, MSFT’s current P/E is double its 10-year average (32.7 now vs. 10-year average. of 16.1).

Amazon.com (AMZN) is a stock that has never traded based on the typical valuation metrics that investors like to use.  Those investors that have traded the stock based on valuation are ones who have made negative bets on it — to the detriment of their portfolios.  Even still, below we show AMZN’s trailing 12-month P/E ratio over the last 10 years.  (The P/E was either above 1,000 or negative when you see it disappear on the chart.)  Laughably, AMZN’s current trailing 12-month P/E of 183.83 is well below its 10-year average of 250+.

Finally, Facebook’s (FB) trailing 12-month P/E ratio has been drifting lower and lower since the start of 2016.  Given that its stock price has been trending higher and higher over this time frame, that means earnings (the “E” in P/E) have been growing even faster than price.  Since it IPOd in 2012, Facebook’s average trailing P/E ratio has steadily trended lower to its current level of 44.7.

We’ve been hearing a lot of talk over the last few days that just a handful of stocks are driving the rally in US equities.  This suggests that the gains aren’t representative of broad market strength, but instead strength in just a handful of stocks.  We’ll be the first to agree that the S&P 500’s gains this year are the result of gains in some of the index’s largest members, but that’s only because they have grown so large.  As we noted earlier this week, the five largest companies in the S&P 500 have a combined market cap of over $2.75 trillion, and the four largest companies in the index have a greater market cap than the entire Russell 2000 small-cap index.  Just because the largest companies in the S&P 500 are doing so well doesn’t mean that the rest of the index is doing poorly though.

The first chart below shows the S&P 500 market cap weighted index over the last twelve months.  As shown in the chart, after the rally of the last few days the index is currently just 0.52% below its all-time high from 3/1.

Because the S&P 500 is a market cap weighted index, if the largest stocks in the index were driving all of the gains, we would expect the S&P 500 equal-weight index to be underperforming.  That isn’t the case, though.  In fact, the S&P 500 equal-weighted index is actually down the exact same percentage amount as its market cap weighted peer.  With both indices down by the same percentage amount from their bull market highs, it’s hard to argue that just a handful of stocks are propping the market up.

Below we provide tables highlighting the 10 best performing stocks in the S&P 100 (100 largest stocks in the S&P) over three different time periods — year-over-year, since the 11/8/16 election, and year-to-date.

As shown, Bank of America (BAC) and Morgan Stanley (MS) top the list of winners over the last year with gains of 60%.  Amazon.com (AMZN) ranks third with a gain of 44.4%, followed by Boeing (BA) and General Dynamics (GD).  Apple (AAPL) ranks 8th best with a YoY gain of 37.39%.

With a gain of 41.47%, Bank of America (BAC) also tops the list of biggest winners since last November’s election.  Tech-behemoth Apple (AAPL) ranks second best with a gain of 29.99%.  Even though it’s the biggest company in the world, Apple has quietly posted huge returns over the last 6-12 months.

Facebook (FB) has also quietly posted big gains recently.  The stock is currently the top performer in the S&P 100 in 2017 with a gain of 26.80%.  Apple (AAPL) ranks second with a gain of 24.56%, while Philip Morris International (PM) is up the third most at +22.72%.

Of course not every stock is up.  In the S&P 100, there are 14 stocks that are down over the last year, and we highlight them in the table below.  Gilead (GILD) and Target (TGT) are down the most with declines of more than 33%.  Bristol-Myers (BMY) and CVS Health (CVS) are the two remaining names that are down 20%+.  Other notables on the list of YoY losers include Ford (F), Verizon (VZ), Exxon Mobil (XOM), Nike (NKE), General Electric (GE), and Coca-Cola (KO).

With “rest of world” outperforming US equity markets so far in 2017, and the US Dollar index fading since it peaked on 12/28/16, it should come as no surprise that US companies that generate a large portion of their revenues outside of the US are outperforming their domestic counterparts.

Using our Interactive International Revenues Database, which allows subscribers to pull up the international and domestic revenue exposure for any stock in the Russell 1,000 or S&P 500, we calculated the median performance of stocks based on revenue exposure levels since the US Dollar’s peak on 12/28.  The results are shown in the chart below.

The median % change for all stocks in the Russell 1,000 since 12/28 is +6.09%.  But stocks that generate more than 80% of their revenues internationally (outside of the US) have seen a median gain of 16%.  On the flip side, stocks that generate 80%+ of their revenues domestically are up just 3.44%.  That’s a huge difference in performance versus the benchmark.  One group has outperformed by more than 10 percentage points (the “Internationals”), while the other group has underperformed by half.

Start a no-obligation 14-day free trial to Bespoke Institutional to use our International Revenues Database now.