5 Biggest Market Caps As % of S&P500

Why cheap Apple shares can’t gain any traction
click for larger graphic


Source: Barron’s

 

 

The chart above shows the 5 largest market cap firms as a percentage of the S&P500 index.

Barron’s points out that when companies hit 5% of the S&P500, it often acts as a cap on further valuation growth. The Trader column points out that “General Electric (GE) and ExxonMobil (XOM) neared the 5% level in the third quarter of 2000 and the first quarter of 2009, respectively, before dropping back. IBM (IBM) got as high as 6% at the end of 1985. That preceded a long down period in terms of its percentage of the S&P’s market value.”

Despite a P/E below 15, when “Apple’s price was $700, its market value was almost 5% of the S&P 500’s.” The reason?

“Investors, particularly professionals, diversify their portfolios, and few are willing to commit more than 6%-7% of their portfolios to one stock, Cohen [Aaron Cohen, president of money manager Financial Partners Capital Management] says. Not everyone can own Apple, and at a certain point, “there was nobody left to buy the stock” who didn’t already have a full position, he adds.”

Hence, argues Barron’s, the difficulty in AAPL powering higher . . .

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