Your Survival Guy

Preparing your investments and family for when disaster strikes.

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Apple: Market Thinks Big is Beautiful…For Now

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Yesterday, Apple surpassed $3 trillion in market cap. That’s a lot of iPhones. Did you know that with $3 trillion you could own ALL of McDonald’s, Walmart, AT&T, Philip Morris, Berkshire Hathaway, Procter & Gamble, JPMorgan Chase, Starbucks, Boeing, Deere, and American Express combined? Notes Spencer Jakab in The Wall Street Journal’s “Heard on the Street” column, “A lot would have to go wrong all at once to torpedo that diversified group of blue-chip stocks.” Spencer continues:

Aside from the concentration risk, the rise of mega companies has been bad for stock returns in general. Apple and the other nine largest constituents of the S&P 500 comprise nearly 30% of its market value, well above the previous concentration peak seen at the height of the tech bubble before a brutal bear market.

Even if that doesn’t happen this time, owning any company that has mushroomed in value means it is hard for it to outperform for much longer without getting uncomfortably large. Dimensional Fund Advisors looked back over the decades to what happens to a stock that has joined the 10 biggest in the S&P 500. In the decade before getting there it has, on average, outperformed a basket of all U.S. companies by an impressive 10% a year. In the next 10 years, though, it actually has lagged behind the market by 1.5% a year.

Action Line: If you feel markets can be irrational (I do), then maybe you need a combat plan. Let’s talk.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com