AdvisorOne contributor Sam Stovall, Standard and Poors’ chief equity strategist, compares investors to Jan Brady in his latest commentary, claiming they’re “frustratingly chanting Apple, Apple, Apple.”
“Shares of Apple rose nearly 50% year to date through April 13, helping the S&P 500 Index advance by 9%, versus the YTD gain of 7.5% for the S&P Small Cap 600,” Stovall explains. “What’s more, Apple recently eclipsed the $600 billion capitalization mark, if only temporarily, and is now the largest stock in the S&P 500, representing 4.56% of the index. It, along with two other tech behemoths, International Business Machines and Microsoft, represent nearly 8.3% of the S&P 500, or equivalent to the smallest 192 companies in the S&P 500.”
So it goes without saying, he adds, that some investors are angered by the 500’s vulnerability to a “Newtonian event:” Apple falling to the ground, and the outsized impact that a declining stock price would have on the Index.
“To these investors, I say ‘don’t get mad, get even’, or look toward equal-weighted indices that level the playing field by removing the skewing effects of mega-cap stocks. In other words, an index that treats ‘Big Blue’ the same as it does Big Lots,” Stovall writes.