Mega-cap stocks, also known as "super-cap" or "ultra-cap" stocks, are the stocks of the largest publicly traded companies in terms of market capitalization. There is no specific cutoff for market capitalization to classify a stock as a mega-cap stock, as it can vary depending on the definition used. However, generally, mega-cap stocks are those with market capitalizations typically exceeding $200 billion or more, although the threshold may change over time as the stock market and companies' valuations fluctuate.
Mega-cap stocks are often well-established, global leaders in their respective industries, and they tend to have significant market presence, large revenue streams, and diverse business operations.
Mega-cap stocks are often considered relatively stable and less volatile compared to smaller-cap stocks due to their size, financial strength, and market dominance. They are typically widely followed by investors and are often included in major market indices, such as the S&P 500 or the Dow Jones Industrial Average.
In 2022, the S&P 500 slid 18.11%. However, the index has rebounded 7.32% in 2023.
Yet, only a handful of mega-cap companies are driving the S&P 500’s rise. According to Apollo Global Management, the top 20 largest companies in the S&P 500 have added nearly $2 trillion in market cap this year, versus $170 billion for the other 480 stocks.
To illustrate this point, the Vanguard Mega Cap ETF (MGC) is up an impressive 8.44% year-to-date, while the Vanguard Small-Cap ETF (VB) is only up 2.89% and the Vanguard Mid-Cap ETF (VO) is up 3.44%.
This skew in the performance of mega-cap stocks gives less credence to the overall market rally. That's because the S&P is a weighted average.
Take for instance these 5 mega-cap stocks in the S&P 500: Microsoft (MSFT) is up 19% in 2023, Apple (AAPL) has jumped 24%, Tesla (TSLA) has risen 48%, Meta (META) has rallied 80%, and NVDIA (NVDA) has surged 83%. Together, these stocks account for 17.7% of the S&P 500's total market cap.
Therefore, should mega-cap stocks stumble, the S&P 500 will be much more vulnerable, creating a tougher environment for investors.
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On the date of publication, Andy Mukolo did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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