It’s a Big Stock World….

…the rest of us are just paying rent. The biggest stocks on Wall Street have been outperforming everyone else at a steady clip for over a year now.

The graph below shows the S&P 100 ($OEX), which is the largest 100 stocks in the S&P 500, in black. There’s also the S&P 500 in gold and the small-cap Russell 2000 ($RUT) in blue. Large stocks have been leading the market since May 28, 2011.

Part of this is what we’ve seen in the bond market — a rush away from risk. Just as bond investors have pushed Treasury yields to all-time lows, stock investors have fled to the most secure names which tend to be the largest stocks on the market.

“A lot of these companies have exposure to Europe and that certainly is a factor to consider,” Todd said in a June 14 phone interview. “Depending on what happens in the market and with Europe, if it doesn’t get resolved, they’ll still get hammered.”

The biggest companies in the S&P 500 derive more business from around the world, getting about 49 percent of sales from outside the Americas, data compiled by Bloomberg show. That compares with the 46 percent for the broader index.

S&P 100 stocks may prove more resilient than their smaller peers during a slower economic expansion because they are more established companies that don’t depend on high-growth markets for their main business. The U.S. advance was led by a 42 percent surge in Apple this year, a rally that boosted its market value by $160.4 billion, more than the individual values of Oracle Corp. and JPMorgan Chase & Co. Bank of America climbed 42 percent, leading financial companies in the S&P 500 to the index’s fourth-biggest advance.

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Dividend yields in the S&P 100 reached 2.3 percent this month, the highest of 2012, while the valuation has declined to 12.7 times annual earnings, 31 percent below the average since 1997. That compares with profit multiples of 28.9 in the Russell 2000 Index (RTY) of small-cap stocks and 17.2 in the S&P Midcap 400 Index. The large-cap gauge is up almost twice as much as both measures this year.

Posted by on June 19th, 2012 at 2:06 pm


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