The stock market’s comeback in 2023 has made it clearer than ever that the engine of the S&P 500 index is very small-cap stocks. For advantage (bullish markets or Bulls And for fascists or Bears) Your weight matters. These are seven companies to be exact. Apple, Microsoft, Google, Amazon, Nvidia, Tesla and Meta are a 58% YTD return 16.5% on advanced index. The remaining 493 rose by 5%.
Goldman Sachs analysts agree that the situation is significant but not entirely unusual, as returns in most years tend to focus on the evolution of a small group that moves better than others. „The top 10 contributors to the group have contributed an average of 32% of S&P 500 returns since 1995”Explain these experts in a recent communication to investors.
How do you know which stocks are the leaders of a portfolio over the years?
Here is the key
Experience in recent years is a common characteristic of stocks that have driven the S&P 500 along with their weights Continued high sales growth. The stocks that now drive the index have an annual growth rate of more than 15% between 2013 and 2019, with the rest at 4%. The consensus is that it will continue at 11% until 2025.
Goldman Sachs helped establish the „10% rule,” a parameter that identifies the values of companies that register. Continued sales growth of at least 10% for two years You can do that during current one and two. Analysts at this investment bank presented this perspective in 2016 and have been updating their list. It is a set in which technology (IT) values dominate, followed by consumer preferences and health.
This week they released a new list that includes 20 values that meet this 10% rule, two more than the average for the past 13 years.
Companies applying this 10% rule to net profit also have a very good evolution, especially one observed with the increase in interest rates from 2022 onwards.
According to Goldman Sachs, there are 18, eight of which are on the previous list, and now, PAYC, FTNT, PODD, CMG, INTU, CDNS, APTV have averaged 29% returns so far this year. .
What are the remaining 10 companies that meet the 10% net income rule?
Goldman Sachs strategists explain that after everything that happened with the pandemic, bonds that meet the 10% selling rule have been trading at normal valuations since 2010.
Portfolios rebalanced every six months based on a 10% sales benchmark outperformed the index between 2010-2021 (up 5 percentage points annually over that period) but underperformed in 2022 with interest rates rising.
A more positive moment in 2023, economic slowdown, but still positive and stable net income helps this group to be a driving force.