Think buying the most-valuable stock is a surefire way to beat the S&P 500? Reality didn't work out that way.
Twelve stocks' market value rose to the top of the S&P 500 since 1926, including Microsoft, Cisco Systems and most recently Nvidia, says Howard Silverblatt of S&P Dow Jones Indices.
Just buying those and holding was a winning stock-picking strategy, right? Wrong. The seven stocks with trading history going back to 1990 lagged the S&P 500 on average since first becoming the index' top dog, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge.
The Biggest Isn't Always Best
The list of companies to take the No. 1 position in the S&P 500 is a storied one. We're talking the bluest of the blue chips like General Motors in the 1920s and Microsoft in the 1990s and again in the 2020s.
But in many cases, these companies were peaking. The seven S&P 500 companies to take the pole position in the index since 1990 gained an average of 643% since then. That lags the S&P 500's 656% average gain during the same time periods.
Three of the seven companies to be No. 1 since 1990 lagged the S&P 500 in following years. And some by large amounts.
Case in point? Consider computer networker Cisco Systems, which became the most valuable S&P 500 stock in March 2000. Shares of Cisco are down 29% since then. During the same period, the S&P 500 is up nearly 300%.
The same thing happened to General Electric. The stock is up just 152% since then, versus a 1,082% gain by the S&P 500. It's important to note, though, GE has spun out major divisions in that time.
Big Is An Asset Lately
If you think owning the biggest S&P 500 stock is a smart move, it's easy to see why. It's working out well lately.
The two companies to take the perch most recently worked out extremely well. Shares of Microsoft are up 1,661% since first grabbing the spot in 1998. That's miles ahead of the S&P 500's 451% rise in that time.
And Apple is up 1,380% from taking No. 1 in 2011. That whips the S&P 500's 325% gain in that time.
So far, Nvidia is keeping up, too. Shares of the AI company are up 19.3% since rising to the top of the S&P 500 on June 1 of this year. The S&P 500 is up just 3.7% in that time.
So for now, bigger is better. "Investors will keep paying up for large-cap growth's superior earnings potential and competitive advantage when it comes to capitalizing on AI," says Nicholas Colas of DataTrek Research.
The S&P 500's Top Dogs
How the most-valuable stocks in the index fared since 1990
| Company | Symbol | Month took #1 | Stock gain | S&P 500 gain |
|---|---|---|---|---|
| Microsoft | 9/1998 | 1,660.8% | 450.5% | |
| Apple | 8/2011 | 1,379.8% | 325.3% | |
| Walmart | 11/1992 | 1,240.6% | 1,207.2% | |
| General Electric | 9/1993 | 152.2% | 1,081.7% | |
| Altria Group | 3/1992 | 77.6% | 1,226.2% | |
| Nvidia | 6/2024 | 19.3% | 3.7% | |
| Cisco Systems | 3/2000 | -29.0% | 296.8% | |
| AT&T | 12/1925 | n/a | n/a | |
| DuPont de Nemours | 6/1955 | n/a | 14,318.3% | |
| Exxon Mobil | 1/1957 | n/a | 11,627.4% | |
| General Motors | 7/1927 | n/a | n/a | |
| International Business Machines | 7/1967 | n/a | 5,938.4% | |
| Average since 1990 | 643.0% | 655.9% |
