Why Do the Biggest Companies Outperform?

Apple's one trillion dollar valuation is a milestone for the largest US companies, which have significantly outperformed their smaller rivals since 2013

John Rekenthaler 7 August, 2018 | 2:16PM
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Apple (AAPL) became the world's first trillion dollar company last week. But this milestone was not an anomaly: the top 1% of US companies have outgunned their rivals since the 2008 financial crisis, with most of these gains made in the last five years.

An investor in August 2013 who sorted all publicly traded firms in the US stock market by their market caps from largest to smallest, selected the top 1%, invested equally in each of those 67 stocks, and then held that portfolio until 2018 would have gained an annualised 13% over the next five years. In contrast, someone who employed the same tactic for the remaining 99% wouldn't have made a penny. Since 1926, half of all listed US stocks have posted negative returns.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Alphabet Inc A2,749.23 USD-0.08Rating
Amazon.com Inc3,325.83 USD-0.29Rating
Apple Inc148.93 USD0.16Rating
Facebook Inc A325.15 USD0.17Rating

About Author

John Rekenthaler

John Rekenthaler  John Rekenthaler is vice president of research for Morningstar.