| Home |
 |
The Chairman
©2005 All content on site protected by copyright |
(address
is not clickable)11/23/2005
Large Caps, by Victor Niederhoffer
It is instructive to look at the returns of the companies that constitute the S&P 500, versus the Index itself. At year end 1999, the Index closed at 1469, versus 1261 today, a decline of 14.2%. Yet, of the 500 companies currently in the Index, 313 are above their 1999 year end level, 158 are below, and 29 weren't publicly traded in 1999. The index itself has a current market cap of $11.6 trillion, a P/E of 18.5, and a dividend yield of 1.8%. Fifteen companies account for more than 1% each of the Index, a cut-off value of $11.6 billion market cap:
Company % Of Index 5 Year Annualized Return Altria 1.3 21.1 AIG 1.6 -1.0 Bank of America 1.6 10.8 Chevron 1.2 5.3 Citigroup 2.2 3.9 Exxon 3.3 6.8 GE 3.3 -5.8 Intel 1.4 -7.9 IBM 1.2 -3.5 Johnson and Johnson 1.6 4.9 JP Morgan 1.2 -5.2 Microsoft 2.3 -11.6 Pfizer 1.4 -6.5 Proctor and Gamble 1.7 1.0 Wal-Mart 1.1 -5.5
Just seven of the 15 companies had positive returns over the five years, versus 66% of the total that had positive returns. The average return for these 15 companies was -1% a year versus an average of 9% a year for an average stock.
From this I conclude:
- There is much retrospective bias in the returns for the companies now in the index versus the original companies.
- The small companies did much better than the larger companies.
- The growth companies performed much better than the value companies. This must be checked with properly adjusted prospective data.
- There is a tendency for big companies to have names that begin with letters earlier in the alphabet than average. just 1, Wal-Mart, is in the bottom third of the alphabet.
- No industry dominates the results for good companies.
- The technology companies did not fare well during this period, which encompassed the NASDAQ crash.