If you lack just a handful of key stocks, you're missing out on a sizable chunk of the S&P 500's profit engine.
Just seven stocks — including Apple, Microsoft and surprisingly Exxon Mobil — hauled in 25% of the S&P 500's total adjusted net income in the just-completed fourth quarter of 2022, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Such concentration of profit might surprise investors. A rise in energy prices and interest rates has pushed up the profits of key S&P 500 companies in energy, technology and financial sectors. Many are now punching over their weight in terms of generating profit vs. their market value.
"The earnings season hasn't been terrible thus far, but by no stretch of the imagination has it been wonderful either," said Christine Short of Wall Street Horizon.
Sizing Up S&P 500 Earnings Season, Exxon Mobil Style
Most of the S&P 500 companies that matter have reported their fourth-quarter earnings. And the results are telling.
So far, 343 S&P 500 companies, or nearly 70%, disclosed how the final quarter of the year went. Exxon Mobil is the most noteworthy. Just that single energy company reported a quarterly profit of $14 billion. That's more than the $13.6 billion Alphabet, which runs the Google money machine, earned.
Interestingly, Exxon Mobil's profit in the fourth quarter accounted for 3.7% of the total made by S&P 500 companies in the period. That's impressive if you consider that Exxon Mobil only accounts for 1.4% of the S&P 500's market value. And it was tossed out of the Dow Jones Industrial Average years ago.
It gets even more interesting. The 11 S&P 500 energy companies to report fourth-quarter profit so far delivered nearly 10% of the S&P 500's profit for the quarter. But the entire energy sector only accounts for 5.1% of the S&P 500 in terms of market value.
Big Cap Tech Still Dominates, Though
S&P 500 energy companies might be delivering over their size, but this is still a megacap-driven S&P 500. Both the top contributors of S&P 500 profit accounted for a combined 12.4%.
Apple, thanks to its duopoly in smartphone sales, is still the profit juggernaut. The company's adjusted net income dropped nearly 14% in the fourth calendar quarter. But it still made nearly $30 billion ins just the quarter. That's more than any other S&P 500 company earned.
And Apple alone pulled in nearly 8% of the profit reported by all S&P 500 companies. Apple, too, contributed a bigger slice of the index's profit than its own stock's 6.6% weight in the index.
And it's a similar story with Microsoft. Sure, the software giant's adjusted net income dropped roughly 7% in the fourth quarter vs. the same year-ago period. But it still managed to turn a profit of $17.4 billion, or 4.5% of all the money made by the S&P 500.
Banks continue to contribute, too. JPMorgan Chase and Bank of America hauled in nearly 5% of the index's total profit.
Miss out on these stocks, and much of the S&P 500's profits slip through your fingers.
Show Me The S&P 500 Profit
Largest contributors to fourth-quarter net income
| Company | Ticker | YTD price change | Sector | % of profit |
|---|---|---|---|---|
| Apple | 18.4% | Information Technology | 7.9% | |
| Microsoft | 13.1 | Information Technology | 4.5 | |
| Exxon Mobil | 6.7 | Energy | 3.7 | |
| Alphabet | 7.1 | Communication Services | 3.6 | |
| JPMorgan Chase | 6.2 | Financials | 2.8 | |
| Chevron | -4.8 | Energy | 2.1 | |
| Bank of America | 7.5 | Financials | 1.8 |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
