These 28 Companies Just Became Very Important

It’s been common knowledge that fewer stocks have been driving the S&P 500 higher since the January swoon. However, most investors probably don’t know how few companies of the S&P 500 represent 50% of domestic profits. The answer might surprise you.

According to S&P Global Market Intelligence and USA Today, in 2015, 28 companies in the S&P 500 made up 50% of domestic profits. In 2014, that number was nearly double where it’s at now, with 52 companies making up 50% of domestic profit.

This new trend is alarming and highlights the issue that the most powerful companies have more sway on policy decisions than in the past, which benefits those companies while often harming competitors. To state the obvious, we’re consistently moving farther away from a free market system. Unfortunately, the only way for the trend to reverse back to normal is as a result of failures.

Of the 28 companies listed below, only 10 have delivered consistent revenue growth over the past three fiscal years, and only nine have delivered consistent net income growth over the past three fiscal years. Additionally, only seven of the companies listed below have delivered stock appreciation over the past year. Amazingly, only one of those companies has delivered consistent revenue and net income growth over the past three fiscal years while also delivering stock appreciation over the past year. Let’s find out which one.

Note, these numbers were retrieved on March 4, 2016.

28 Very Important Companies

The chart below contains Share (of U.S. profits), 1-Year Stock Performance, Dividend Yield, Revenue and Net Income. For the latter two categories, if the company has delivered consistent growth over the past three fiscal years, you will find a “Y.” If the company has failed to deliver consistent growth over the past three fiscal years, you will find an “N.”

Share

1-Year Stock Performance

Dividend Yield

Revenue

Net Income

AAPL

6.7%

-13.68%

1.91%

Y

Y

JPM

3.0%

-7.68%

3.05%

N

Y

BRK-B

3.0%

-1.29%

N/A

Y

Y

WFC

2.8%

13.21%

3.19%

Y

N

GILD

2.2%

-6.24%

1.79%

Y

Y

VZ

2.1%

4.94%

4.33%

Y

N

C

2.1%

-22.02%

0.49%

N

N

GOOGL

2.0%

40.34%

N/A

Y

Y

XOM

2.0%

-3.82%

3.51%

N

N

BAC

2.0%

-18.02%

1.55%

N

N

JNJ

1.9%

8.41%

2.75%

N

N

WMT

1.8%

-15.91%

2.94%

N

N

T

1.7%

17.44%

4.99%

Y

N

IBM

1.6%

-8.04%

3.48%

N

N

INTC

1.4%

0.57%

3.29%

N

N

MSFT

1.4%

30.40%

2.65%

Y

N

CSCO

1.3%

-0.68%

3.76%

N

N

GM

1.2%

-19.05%

5.18%

N

N

ORCL

1.1%

-5.48%

1.49%

N

N

DIS

1.1%

-9.74%

1.47%

Y

Y

PG

1.1%

-1.04%

3.19%

N

N

CMCSA

1.0%

-4.17%

1.79%

Y

N

DOW

1.0%

3.95%

3.62%

N

N

AAL

0.9%

-18.33%

1.04%

N

Y

UTX

0.9%

-13.21%

2.53%

N

Y

F

0.9%

-20.73%

4.78%

N

N

KO

0.9%

14.64%

2.99%

N

N

UAL

0.9%

-10.85%

N/A

N

Y

The only company to deliver consistent revenue and net income growth over the past three fiscal years as well as stock appreciation over the past year is Alphabet Inc. (GOOGL).

The Bottom Line

The list of companies that drive the market is becoming more concentrated. This leads to higher-risk/higher-reward. What stands out is that only nine of these companies have been delivering consistent net income growth. If cost-cutting isn’t making up for a lack of top-line growth, then there’s nowhere left to go to pique investor interest. You can’t say buybacksbecause they’re slowing due to higher borrowing costs. Fortunately, there are companies that consistently hike their dividends, but that’s usually not often enough to make up for stock depreciation in a challenging economic and consumer environment, especially if the Fed were to turn hawkish. That doesn’t seem likely right now, but it can’t be ruled out as a possibility if economic readings are improving, and the stock market is appreciating.

Dan Moskowitz does not have any positions in any of the stocks listed above. He is long/short, but net short the market.

Originally Posted at Investopedia

— Investopedia

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