Dave Rosenberg had an interesting set of observations in today's Breakfast with Dave.

  • The five largest stocks (Apple, Alphabet, Facebook, Microsoft and Amazon) now comprise nearly one-fifth of the entire S&P 500 market cap.
  • This is the highest concentration since the dotcom bubble peak of 2000.
  • I’m sure the majority don’t realize that for every hundred dollars they are plowing into these [passive ETF index] vehicles, they are putting nearly $20 of that into just five stocks.
  • Just remember, that these stocks can have as much influence on the way down as they did on the way up. And we should also remember that every bubble pops.
  • Once it becomes apparent that these growth companies can’t continue to grow by the multiples of nominal GDP that are currently priced in, the realization will send these stocks into a period of downward momentum that could be accentuated by a herd effect heading to the exits in these heavily populated indexed funds.

Market Caps

  1. Apple (AAPL): $1.4 Trillion
  2. Microsoft (MSFT): $1.4 Trillion
  3. Amazon (AMZN): $1.1 Trillion
  4. Alphabet (GOOG): $1.0 Trillion
  5. Facebook (FB): $0.61 Trillion

What's Cheap?

  • As for the energy stocks, they now comprise a mere 4% share of the S&P 500 market cap. A decade ago, the share stood north of 11%. The only sector trading more inexpensively are the financials ─trading at a 13.2x forward price-to-earnings multiple compared with 18.6x for the overall market.
  • I highly recommend a read of Energy Stocks Might Have Finally Hit Bottom on page 14 of Barron’s.
  • Just look at the dividend yields on some of the bellwethers, ranging from 3% to 7%, and some with price-to-earnings multiples of 10x-12x.

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