How Risky is the S&P 500 Top 10 - Focus on Apple, Facebook, Microsoft, Amazon, JNJ | Summary and Q&A

TL;DR

Analyzing the performance of top S&P 500 companies from different decades reveals that perceived strength does not always guarantee long-term success.

Key Insights

• 🍉 Perceived strength doesn't guarantee long-term success for top companies.
• 🍝 The performance of top companies from past decades indicates the risk of underperformance over time.
• 😀 Current top companies like Apple, Microsoft, Amazon, and Facebook face their own unique risks and challenges.
• 👨‍💼 Large companies are vulnerable to unforeseen risks that can impact their business models and profitability.
• 🔬 It is important for investors to consider the risks associated with investing in any company or sector.
• 💪 Peter Lynch's approach of investing in overlooked sectors and identifying strong companies within them can be a successful strategy.

Transcript

good day fellow investors now yes if P and the top a City 500 companies continue to go higher higher higher and higher and what I want to do is to look at are they going higher because they are really strong companies with low risk or they're as the prices go higher the risk is higher in order to do that I'll annihilate top 10s AP 500 holding now t... Read More

Questions & Answers

Q: How have the top S&P 500 companies performed in relation to the index over different decades?

Analysis shows that, apart from Exxon in the 1980s and Apple in the 2010s, most top companies underperform the S&P 500 in the long run, indicating that initial strength doesn't guarantee sustained success.

Q: What are the risks for current top companies like Apple, Microsoft, Amazon, and Facebook?

Apple faces the risk of disruption and loss of dominance if another company catches up, while Microsoft struggles with stagnant growth and intense competition. Amazon faces challenges in maintaining profitability in the fiercely competitive online commerce sector, and Facebook risks unforeseen changes impacting its dominant position.

Q: How does unforeseen risk impact large companies?

Unforeseen risks can quickly impact large companies, as seen in the examples of America Online, Yahoo, and other dominant companies from the past that no longer exist. It is important to consider these risks when positioning a portfolio.

Q: Is it wise to solely focus on top-performing sectors and companies?

Peter Lynch, an investment guru, found success by focusing on "boring" sectors that others overlooked and identifying the best companies within those sectors. This perspective suggests that it is not always wise to chase the hottest sectors or companies.

Summary & Key Takeaways

• The top 10 companies in the S&P 500 index account for 11.74% of the index, while the remaining 495 companies make up the remaining 88.26%.

• Analysis of the top 10 companies from the 1980s, 1990s, 2000s, and 2010s shows that most companies underperform the S&P 500 in the long run, despite initial strength.

• Current top companies like Apple, Microsoft, Amazon, and Facebook have their own risks and challenges, including competition, technology disruptions, and unforeseen risks impacting large companies quickly.