One of our most-read reports is The Closer, which goes out each evening to Bespoke Institutional clients. Last week, a client was curious about the impact of the FAANG stocks (Facebook, Apple, Amazon, Netflix, and Alphabet, née Google). These tech high-fliers have seized the conversation in equity markets over the last few years, and rightfully so given their strong performance, huge market caps, and torrid growth. As shown in the chart below, their aggregate weight in the S&P has increased from about 7.5% to over 12% in the last three years. It hasn’t been entirely smooth sailing the whole way – notably Apple had a period of declining weight which it has since shaken off. It’s also worth pointing out that Netflix is much smaller, and despite growing share of market cap strongly, it’s still very low-weighted in the index.
With higher weights comes a higher contribution to return. As shown below, of the 27% 3-year return for the S&P 500 through last week, 7.7 percentage points were because of the FAANGs, punching well above their market share weight. Of the 5 FAANG stocks, all except NFLX had added between 1.6 and 2.0 percentage points to S&P 500 performance over the past three years.
The YTD performance of the stocks versus the index is a similar story, with about 27% of the S&P’s gain in 2017 attributable to these 5 stocks. The rest of the index has added 11.5% to total performance YTD, which isn’t bad, but there’s a lot of outperformance from these large tech gainers. Of the 5, Apple is by far the biggest single driver, adding 1.5% to the aggregate S&P 500 return.
Tonight in The Closer, we’ll be discussing US economic data, specifically retail employment and the government deficit. If you’d like to receive a copy in your inbox, make sure to sign up for a free two week trial of our monthly or annual Institutional subscription today.