Adam Johnson of Bloomberg discussed five major stocks that matter more than others yesterday. The five biggest stocks in the market: Apple Inc. (NASDAQ:AAPL), Exxon Mobil Corporation (NYSE:XOM), Google Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT) and Berkshire Hathaway Inc. (NYSE:BRK.A) have a combined market cap of $2.04 trillion, which is almost equal to the $2.06 trillion capital of the Russell 2000; the 2000 smallest stocks in the U.S. market. So the 5 major stocks have the same market cap of 2000 stocks combined!
Johnson went on to talk about the Russell 3000, which includes large, medium and small capital stocks. Pointing at an exponentially decreasing graph and as per the statistics were majorly revolving around few major stocks. Johnson was referring to the capital concentration at the beginning of the graph. The S&P 500 covers a major part of the market. But the statistics suggest that not even the top 250, but only the top 50, really matter.
“That is why you need to worry about 5 stocks. If you look at those 5 stocks again, Apple, Exxon Mobil, Google, Microsoft and Berkshire Hathaway, the 5 largest stocks in the U.S. market cap, the average P/E ratio works out to about 15.6 times. That is right in the middle range of what we see historically 14 to 17.”
Apple Inc. (NASDAQ:AAPL) has a good P/E ratio and it’s a very popular stock in the market. The recent split made it even more affordable per stock and some feel that it would get better and is an exciting prospect.
The average earnings growth of the five major stocks that includes Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT) is about 9.6% which is three times GDP. In the earnings growth, Google Inc. (NASDAQ:GOOGL) is at top with 21% while Microsoft Corporation (NASDAQ:MSFT) has the lowest earnings growth among the top 5 with -1%. Apple Inc. (NASDAQ:AAPL) sits pretty with 13% earnings growth.
“Stocks are not expensive, and they are growing three times as fast as U.S. economy. That’s why we are making new heights on the market. Its 5 stocks, it’s not 3000”
These five stocks matter the most other than the others and Apple Inc. (NASDAQ:AAPL) tops the list.
Disclosure: none
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