Forget the top 5, these stocks were the biggest movers in the S&P 500 in 2023

As the gulf between America’s five largest companies and everyone else widens to exceedingly worrying levels, gyrations among the rest of the top 50 in the S&P 500 are at a 10-year high.

The 50 most valuable companies in the benchmark, which now make up about 56% of its total weight, moved up or down on average nine places this year, tied for the most since at least 2013 and almost double in 2019. And that volatility comes even as the median valuation gap between each company in the top 50 has more than doubled to $7 billion since 2013.

It suggests that as the S&P 500’s top-heavy skew worsens, there’s increasing competition for investor funds in the rest of the index.

The much-discussed concentration risk at the very top – Apple is now nearly worth more than France’s entire stock market – means investors are increasingly reliant on a shrinking number of companies for returns. The top 10 companies by value are now worth as much as the bottom 415. In 2013, that number was 294.

“This is what happens when your best players put up the most points,” Todd Sohn, ETF strategist at Strategas Securities, said in an interview. “They do what they’re supposed to do and then you gotta make sure the bench – the rest of the index – is holding up their end of the bargain, otherwise, that’s when you get real big problems.”

The rankings volatility can also be partly attributed to Covid-19, Sohn said, as the pandemic abruptly changed business models and therefore company valuations.

Among the companies that joined the top 50 this year are several that seized on opportunities created by the pandemic including Salesforce Inc., Advanced Micro Devices Inc., Intel Corp., Intuit Inc., Boeing Co., Netflix Inc. and Qualcomm Inc.Most Valuable Player: Nvidia
Nvidia is the first company in at least 20 years to start a year outside the S&P 500’s top 10 and rise to finish among the top five. Its valuation grew by about $829 billion thanks to AI-fuelled demand for its graphics processors.

Meta Platforms”s valuation also boomed, recovering its 2022 losses to grow by $582 billion.

Their performances may portend lower returns, thanks to newly raised expectations.

“Once a company is in the top 10 largest US stocks, it delivers at or even slightly below market returns in subsequent periods,” Wes Crill, senior investment director at Dimensional Fund Advisors, said in an interview.

Most Improved: Cruises
Royal Caribbean Cruises rebounded from its pandemic crisis to rise 165 places to the 252th most-valuable company in the S&P 500, passing the likes of Warner Bros. Discovery and Delta Air Lines. Peer Carnival similarly gained 151 spots to 301st.

Travel and entertainment stocks like Expedia Group, Live Nation Entertainment and Hilton Worldwide Holdings each also rose 40 places as consumers embraced in-person experiences.

A Year to Forget: Renewables
Enphase Energy – valued at more than $36 billion at the start of the year – lost almost half of its market value and fell 141 places to 352th as interest rate hikes curtailed spending on capital-intensive solar energy projects. Peer SolarEdge Technologies was removed from the index altogether after falling 67% this year.

Moderna, Dollar General, Albermarle, AES and FMC all dropped at least 95 places this year, shedding about $90 billion in value in total.

Rookie of the Year
Since joining the index in March, Fair Isaac, the company behind FICO credit scores, has seen its share price rise by over 60%.

Holding the 272th spot in the index, it would’ve increased its standing by nearly 117 places if it were included from January. 1. Blackstone Inc. now sits just within the top 50 – by far the highest among new additions this year – despite only joining in the September rebalance.

In Memoriam
Fifteen stocks were replaced, including SVB Financial Group, Signature Bank and First Republic Bank, which were delisted after going bust during March’s banking crisis.

The 11 relegated firms still trading have shed a cumulative $33 billion in valuation, with SolarEdge Technologies Inc., Advanced Auto Parts and DISH Network accounting for about two thirds of that.

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