S&P 500: Top 5 giants drive unprecedented volatility in top 50 companies

As America's five largest companies dominate the S&P 500, the remaining top 50 experience a decade-high volatility. Concentration risk intensifies, with Apple's worth nearing France's entire stock market. Trillion-dollar giants, like Nvidia and Meta, reshape the rankings, potentially signalling lower returns. Cruise operators rebound, while renewables, including Enphase Energy, face setbacks. Rookie Fair Isaac sees a 60% rise, while 15 stocks, like SVB Financial, exit, and new addition Blackstone climbs. The S&P 500 landscape shifts, raising concerns about reliance on a shrinking pool of market leaders..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Forget the Top 5, These Stocks Were the Biggest Movers in the S&P 500 in 2023.By Redd Brown.As the gulf between America's five largest companies and everyone else widens to exceedingly worrying levels, gyrations among the rest of the top 50 in the S&P 500 are at a 10-year high..___STEADY_PAYWALL___.The 50 most valuable companies in the benchmark, which now make up about 56% of its total weight, moved up or down on average nine places this year, tied for the most since at least 2013 and almost double in 2019. And that volatility comes even as the median valuation gap between each company in the top 50 has more than doubled to $7 billion since 2013..It suggests that as the S&P 500's top-heavy skew worsens, there's increasing competition for investor funds in the rest of the index. .The much-discussed concentration risk at the very top — Apple Inc. is now nearly worth more than France's entire stock market — means investors are increasingly reliant on a shrinking number of companies for returns. The top 10 companies by value are now worth as much as the bottom 415. In 2013, that number was 294.."This is what happens when your best players put up the most points," Todd Sohn, ETF strategist at Strategas Securities LLC, said in an interview. "They do what they're supposed to do and then you gotta make sure the bench — the rest of the index — is holding up their end of the bargain, otherwise, that's when you get real big problems." .The rankings volatility can also be partly attributed to Covid-19, Sohn said, as the pandemic abruptly changed business models and therefore company valuations. .Among the companies that joined the top 50 this year are several that seized on opportunities created by the pandemic including Salesforce Inc., Advanced Micro Devices Inc., Intel Corp., Intuit Inc., Boeing Co., Netflix Inc. and Qualcomm Inc. .Most Valuable Player: Nvidia.Nvidia Corp. is the first company in at least 20 years to start a year outside the S&P 500's top 10 and rise to finish among the top five. Its valuation grew by about $829 billion thanks to AI-fueled demand for its graphics processors. .Meta Platforms Inc.'s valuation also boomed, recovering its 2022 losses to grow by $582 billion..Their performances may portend lower returns, thanks to newly raised expectations.."Once a company is in the top 10 largest US stocks, it delivers at or even slightly below market returns in subsequent periods," Wes Crill, senior investment director at Dimensional Fund Advisors, said in an interview. .Most Improved: Cruises.Royal Caribbean Cruises Ltd. rebounded from its pandemic crisis to rise 165 places to the 252th most-valuable company in the S&P 500, passing the likes of Warner Bros. Discovery Inc. and Delta Air Lines Inc. Peer Carnival Corp. similarly gained 151 spots to 301st. .Travel and entertainment stocks like Expedia Group Inc., Live Nation Entertainment Inc. and Hilton Worldwide Holdings Inc. each also rose 40 places as consumers embraced in-person experiences. .A Year to Forget: Renewables.Enphase Energy Inc. — valued at more than $36 billion at the start of the year — lost almost half of its market value and fell 141 places to 352th as interest rate hikes curtailed spending on capital-intensive solar energy projects. Peer SolarEdge Technologies Inc. was removed from the index altogether after falling 67% this year..Moderna Inc., Dollar General Corp., Albermarle Corp., AES Corp. and FMC Corp. all dropped at least 95 places this year, shedding about $90 billion in value in total..Rookie of the Year.Since joining the index in March, Fair Isaac Corp., the company behind FICO credit scores, has seen its share price rise by over 60%. Holding the 272th spot in the index, it would've increased its standing by nearly 117 places if it were included from Jan. 1. Blackstone Inc. now sits just within the top 50 — by far the highest among new additions this year — despite only joining in the September rebalance..In Memoriam.Fifteen stocks were replaced, including SVB Financial Group, Signature Bank and First Republic Bank, which were delisted after going bust during March's banking crisis. The 11 relegated firms still trading have shed a cumulative $33 billion in valuation, with SolarEdge Technologies Inc., Advanced Auto Parts Inc. and DISH Network Corp. accounting for about two thirds of that. .Read also:.🔒 Diamonds in the rough: The FT chats to De Beers CEO Al CookCape Winelands Airport's big plans: Premier diversion hub, doubling tourist numbers – Nick Ferguson🔒 Eternal enterprises: Timeless wisdom from the world's oldest businesses.© 2023 Bloomberg L.P.

S&P 500: Top 5 giants drive unprecedented volatility in top 50 companies

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