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A Look Inside SPY And VOO: What’s Changed Since December 31, 2021? (NYSEARCA:SPY)


S&P 500

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When I have been researching recent articles about the Vanguard S&P 500 ETF (NYSEARCA:VOO) I noticed that Vanguard only provides investors with information about its holdings that is more than a month out of date -sometimes as much as two months late. Since VOO is a share class of a mutual fund The Vanguard 500 Index Fund (VFIAX), Vanguard is not required to report its holdings daily as most other ETFs must do. A quick look at the Fidelity 500 Index Fund (FXAIX) showed that its current data was also dated as being as of January 31, 2022.

A lot has happened in the past few months–which just might be the understatement of the year! So I began to wonder just how misleading the data we are given about Vanguard and other fund providers very popular S&P 500 index funds might be. How much the holdings of the ETFs that track the S&P 500 have changed since 2022 began?

VOO tracks the S&P 500 index very closely, so it is reasonable to assume that its holdings will be extremely similar to those of another ETF that tracks the same index – the SPDR S&P 500 Trust (NYSEARCA:SPY). SPY does report its full holdings daily along with information about what percent of the index’s total value each stock contributes. When I was researching this article on March 12, 2022 I was able to download information about SPY’s complete holdings as of March 10, 2022 from State Street Global Advisors website.

I then went to the Vanguard Advisors site where I downloaded VOO’s holdings as of December 31, 2021 and the valuation metrics it gives us for VOO as of January 31, 22. Though Vanguard gives us its holdings as of earlier month ends, it does not give us valuation metrics for any but the latest period it reports on.

The S&P 500’s Correction Has Changed its Metrics Since Jan 31, 2022

P/E Ratio

Vanguard tells us that VOO’s P/E ratio at the end of January was 22.8. State Street Global Advisors (SSGA), SPY’s fund provider, tells us that the S&P 500’s current P/E ratio is now 20.71. This is a significant drop–one that puts its P/E ratio back at a level that is more characteristic of where it has been during periods when the market was healthy and corporate earnings were growing strongly. (For more details on the S&P 500’s P/E ratios under different circumstances see this recent article.)

More importantly, SSGA tells us that the S&P 500 index’s predicted P/E for the year is only 19.02. This is a very big change from Vanguard’s 22.8.

Future Earnings Growth Rate

SSGA also tells us that the estimated future earnings growth rate of the S&P 500 index as a whole is 14.12%. This is a lot lower than the earnings growth rate Vanguard reports for VOO, which is 18.36%. As usual, Vanguard doesn’t give us any details as to how that earnings growth rate was arrived at.

Information about the Size of Individual Holdings

SSGA tells us that right now the Weighted Average Market Cap of the companies in SPY is $580,519.30 Million and that the Median Market Cap of SPY’s holdings is only $30,369.97 Million. The Mean Market Cap size they report is $79,208.39 Million.

Vanguard tells us that on January 31, 2022, VOO’s Median Market Cap was $203.2 Billion. SSGA’s $30,369.97 Million Median figure is so much different from Vanguard’s that one of two things have happened. A lot of stocks in the S&P 500 index have shrunk their market caps due to price collapses or one of these numbers is being reported incorrectly.

Be that as it may, as you will see when we get into the details, SPY’s weighted average is far more illustrative of what is really going on in the S&P 500.

The median is a very misleading number to use for an index where a very small number of extremely large companies determine most of the entire index’s performance. SSGA gives us the size range of the stocks in the S&P 500 index. The largest is $2,590,351.80 Million and the Smallest is $5,223.45 Million, which is less than half of the minimum size Market Cap a stock needs to have to enter the S&P 500, which is currently $13 Billion. That means the largest stock is 496 times larger than the smallest and explains why the Weighted Average Market Cap is so huge.

All of which points to the fact that is not at all clear from Vanguard’s metrics: The S&P 500 is no longer, as claimed a Large Cap Index, but is instead a Mega Cap index.

Dividend Yield Information is Confusing

Vanguard tells us VOO’s dividend yield is 1.33% with no as-of date given. It also reports a SEC yield of 1.34% as of Feb 28, 2022 (which is different from the date of most of the other information it provides for VOO.)

SSGA tells us that SPY’s 30 day SEC yield is 1.32% and that the weighted average yield of the S&P 500 index is 1.42%. It is really hard to know what the actual distribution yield of these S&P 500 index ETFs will be going forward as the quarterly payouts of these ETFs does not follow a consistent pattern.

The Top-Heaviness of the S&P 500 Continues on Almost Unchanged

I was curious to learn how much of a change there had been in the weights of the individual stocks making up the S&P 500. The first thing I noticed when I compared the lists of their holdings at the end of December 2021 and now, ranked by weight, was that despite what we have heard about a “rotation to value” and the devastation we have seen in the Tech sector, there has been little change in how top heavy the S&P 500 has become and how large a role the biggest tech stocks play in its total value.

Both ETF companies tell us what percentage each stock in the index represents. That percentage tells you how much of your investment dollar buys shares of that stock. Apple (AAPL), with its 6.85% weight in the S&P 500 gets $6.85 of every 100 dollars you invest and $68.50 of every $1000.

The percentage each stock represents drops steeply from the top 10. If you rank the stocks in the S&P 500 by weight by the time you get to the 100th stock, which is Marsh & McLennan Companies, Inc. (MMC), it makes up only .21% of the S&P 500’s total weight. This means your $100 buys only 21 cents worth of Marsh & McLennan and if you invest $1000 you are still only buying $2.10 worth of it. That is just 3% of the portion of your investment dollar that goes into buying shares of Apple. You are investing even less in the remaining 405 stocks in the S&P Index than you are in Marsh & McLennan–and by the time you get to the last 100, far, far less.

How Have the Weights of the Top Stocks in the S&P 500 Index Changed Since The Beginning of the Year?

The top 100 stocks in the S&P 500 index made up 68.9% of the S&P 500 at the end of December. They make up 69.02% of its value now, so the influence of the other 405 stocks is slightly less now.

The Top 10 stocks in the index made up 29.09% of the S&P’s weight in December. Now they make up 28.28%, which represents a slight decline.

Only 39 stocks out of all the 505 stocks in the S&P 500 index individually contribute more than .50% to the total value of that index. All the rest contribute less than 7.3% of what Apple does.

How the Top 10’s Stocks Weights Have Changed

Let’s look, then at how the weights of the Top 10 stocks in two S&P 500 ETFs have changed since the end of December.

Top 10 Stocks in the S&P 500 December 31, 2021 and March 10/2022

Changes in weighings in the S&P 500 ETFs 12/31/21 to 3/10/22

SSGA SPY information page, Vanguard Advisors VOO information page, table and calculations by the author

The main explanation for the very slight .81% loss in the Top 10 stocks’ weighting is clearly the decrease in the share prices of Microsoft, Tesla, NVIDIA, and most dramatically, Meta (FB). But even as those stocks prices declined, that decline was balanced by the rise in the share prices of other stocks that had been in the Top 10 at the beginning of the year. Increases were seen in both share classes of Alphabet (GOOG) (GOOGL), Berkshire Hathaway (BRK.B), and UnitedHealth Group (UNH). Indeed, most of the decline in the weight of the Top 10 stocks as a whole can be attributed to Meta’s spectacular 44.58% price collapse since the beginning of 2022. But the influence of those same Top 10 stocks still remains almost the same.

This makes clear one advantage of investing in VOO. Even devastating losses in a few extremely popular stocks won’t do much to harm your portfolio. Only very broad declines in the prices of hundreds of stocks will do that.

The Stocks that Saw Their Share in the S&P 500’s Total Value Grow Since December 2021

I then went in and compared by hand the weightings of each of the Top 100 stocks on the S&P 500, comparing their current weight in SPY to their weight in VOO back at the end of December to see how their contribution to the total share price of the S&P 500 had changed since the beginning of the year.

I used VOO to estimate the December S&P 500 Index figures as State Street does not give us the ability to download the full holdings of SPY with their weights as of December 31, 2021. Vanguard does let us download VOO’s holdings at that date. I assume there should be very slight differences in the percentage each stock made up in these ETFs given that they are managed by different organizations, but the differences shouldn’t be too stark as they track very closely save for the price difference caused by SPY’s higher expense ratio.

I then sorted them the size of their gain or loss of weight during that period. In the table below you can see the sorted list of stocks whose contribution to the total value of the S&P 500 rose over .05%. I ignored smaller changes given the differences to be expected in two different ETFs tracking the same index.

Stocks in the S&P 500’s Top 100 With Cap Weights Rising ≥ .05%

Top 100 Stocks in S&P 500 sorted by Market Cap Gain

Data from SSGA and Vanguard, Analysis and Table by the Author

Oil Stocks Market Caps have Swelled and Increased their Influence

As you can see in the table above, the big oil companies Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP) have seen their market caps surge as their share prices have shot up as a result of world-wide sanctions on Russia, a major oil producer.

Keep in mind, though, that these oil companies still play a much smaller role in the overall value of the S&P 500 than they did in the inflationary early 1980s when oil companies dominated the S&P 500’s Top 10.

Traditional Value Stocks Are Seeing a Very Modest Increase in Impact

None of the traditional value stocks have seen their market caps increase to the extent of the oil giants. Berkshire Hathaway (BRK.B) is the only such stock to see a significant gain of .30% in its share of the total value of SPY.

Several health sector stocks, all members of a previously out-of-favor sector, have improved their weightings too: mega cap health stocks AbbVie (ABBV), Johnson & Johnson (JNJ), United Health Care (UNH) and Pfizer (PFE). Bristol Myers (BMY), Merck (MRK), Medtronic (MDT), CVS (CVS), and Eli Lilly & Co (LLY) have also seen some growth in their share of the S&P 500’s total value, but their increase in their share of the S&P 500’s total value is not very significant. If you invest $1000 in an S&P 500 ETF like SPY or VOO right now, you are buying 50 cents more CVS and Lilly than you were buying in late December 2021. Contrast that with the $26 less of Microsoft (MSFT) you are buying now compared to what was allocated to Microsoft from of your SPY or VOO investment at the end of December.

Many investors don’t realize how relatively small the market caps are of many of the popular value stocks they might think they are investing in when they buy shares of VOO or SPY. Most of these stocks have very little impact on the share price of these ETFS. Look at how small the percentages are for some well known dividend growth companies. Colgate (CL) makes up just .17% of the S&P 500, Kimberly-Clark (KMB), .11% or Realty Income (O) .10%.

This means that even if these smaller companies do extremely well, you won’t see much impact from their success. Kroger (KR), for example, is up 23.68% since the beginning of January. But its share of the S&P 500 index’s value has only risen from .07% to .11%. So if you bought $1000 worth of SPY or VOO at the end of December your share of Kroger’s 23.68% gain is just 40 cents.

This is why even if traditional dividend paying value stocks do surge you won’t see much change in the S&P 500’s share price. The top 25 stocks in the S&P 500, which range from Apple’s 6.85% share to Cisco’s (CSCO) .64% share totally dominate the price action of the S&P 500, and as mentioned before only 39 stocks have shares greater than .50%.

The Stocks that Saw Their Share in the S&P 500’s Total Value Sink

The table below confirms that highly overvalued investor-darlings have seen their share of the S&P 500 diminish, though, as we saw, not enough to drive Tesla (TSLA) or Meta (FB) out of the S&P’s top 10 largest holdings.

Stocks in the S&P 500’s Top 100 With Cap Weights Dropping ≥ .05%

Stocks in the S&P 100 sorted by market cap loss

Data from SSGA and Vanguard, Analysis and Table by the Author

Despite having seen its price drop by 44.58% since year end, Meta, with its weight in the S&P 500 of 1.28% still plays a larger role in determining the share price of the S&P 500 than does Exxon Mobil whose weight is only 1%.

Microsoft and NVIDIA (NVDA) lost about a quarter of a percentage point each. But as we can see from the list above, stocks with smaller market caps have seen their rankings decrease far more dramatically than the largest mega cap stocks, all of which that still have rankings close to what they were at year end, despite dropping prices.

PayPal (PYPL), which has seen its price drop by 50.46% since year end, which is a collapse very similar to Meta’s decline has sunk much lower in the market cap weighted stock rankings than has Meta. PayPal was the 35th stock in the S&P 500 when ranked by market cap in December but is currently the 66th. Meanwhile, Meta has only dropped from 7th place to the 10th.

This market cap weighting protected you from PayPal’s enormous share price drop because back at the end of December it only made up .54% of VOO’s value. So a $1000 investment would have bought $5.40 worth of Paypay. Since you now own only $3.20’s worth. PayPal dinged your $1000 investment for only $2.20.

But it also keeps you from gaining when companies with smaller market caps see huge price gains. The $2.30 of your December 31, 2021 $1000 investment you put into ConocoPhillips has grown only $3.70 despite ConocoPhillips’ 35% gain in price since 2022 began. Meanwhile, you are still investing $128 worth of Meta shares with a current $1000 investment in an S&P 500 ETF and only $3.70’s worth of ConocoPhillips.

The Size Factor Dramatically Weakens the Impact of Smaller Companies’ Share Price Growth or Decline

After looking at the changes in how much a stock contributes to the S&P 500’s total price, I sorted the stocks from the S&P 500’s Top 100 by how much their individual share of the S&P 500’s total value had grown relative to what their share had been in December. This change would correspond more closely to how their individual share prices have performed over this period. Those that have seen large gains will see their share of the S&P 500 increase, but if it starts out very small, as we saw with ConocoPhillips above, its role in the S&P 500 ETFs will still remain small

The S&P 500’s Top 100 Stocks With The Largest Relative Gains in Market Cap Size

Top 100 Stocks With Relative Market Cap Weight Gain ≥ 10%

Stocks in the S&P 500 with Large Relative Market Cap Gains

Data from SSGA and Vanguard, Analysis and Table by the Author

As you can see, though we see familiar names on this list, the order is quite different from the order we saw in the list of companies that had achieved a larger percentage of the S&P 500’s total value since December.

Though Exxon Mobil experienced almost the exact same growth in its share of the S&P 500’s total value as did Chevron, Chevron’s price grew 10.35% more than did Exxon Mobil’s between December 31, 2021 and March 10, 2022. That’s because Chevron started out with a smaller market cap.

And though Exxon Mobil and ConocoPhillips saw their share prices grow by almost the exact same percent over this period, Exxon Mobil’s share of your S&P 500 investment dollar grew by .36% while ConocoPhillips’ share grew only by .14%. So you bought $2.20 more of Exxon Mobil than of ConocoPhillips with your $1000 dollar investment in SPY or VOO. This is entirely due to Exxon Mobil having so much larger of a market cap to start with.

The S&P 500’s Top 100 Stocks that have Seen the Greatest Declines in Share Price

Below you see the stocks from the S&P 500’s top 100 stocks that have seen their market caps shrink at least 10% compared to what they were at the end of December 2021.

Top 100 Stocks With Relative Market Cap Weight Loss ≥ 10%

S&P 500 Stocks with 10% or greater relative market cap loss

Data from SSGA and Vanguard, Analysis and Table by the Author

PayPal and Meta which we discussed earlier saw the worst declines, but quite a few other stocks that play a much smaller role in determining the price of a share of the S&P 500 declined significantly too, notably American Tower (AMT) and Zoetis (ZTS) both of which only contributed about a quarter of a percentage point to the total value of the S&P 500. American Tower’s share price has dropped 18% since the end of December. Zoetis has dropped 20.83%.

In this case, the fact that your $1000 only bought you $3.30’s worth of American Tower on December 31, 2021 and that its share is now worth only $2.90 works in your favor. But don’t forget, you also missed out on American Tower’s 279.39% share price growth over the last decade, because its original share of the S&P 500 was so small that even after that stunning growth it only made up .33% of the S&P 500’s value.

Use SPY for Current S&P 500 Valuation Metrics

Obviously, investors in VOO should ignore Vanguard’s information page for VOO and any other of its index funds and ETFs that report metrics that lag a month or two behind the current situation. Investors in VOO can find up-to-date information about the S&P 500 index that VOO tracks by visiting SSGA’s information page for SPY. Investors in other Vanguard ETFs, however, should be very cautious when using any of the valuation metrics Vanguard provides to understand the valuation of what they are actually buying.

Expect SPY to Keep Being a Monster Mega Cap ETF Unless all Top 10 Stocks’ Market Caps Crumble

When it comes to looking at how changes in the share prices of the stocks that make up any of the S&P 500 funds or ETFs, be they VOO, SPY, VFIAX, or the iShares Core S&P 500 ETF (IVV), it really doesn’t seem to matter how up-to-date the information is that you get from the fund provider. All that really seem to matter is how a very small number of stocks with enormous market caps perform. The emergence of a very small number of Monster Mega Stocks has made the performance of hundreds of other large cap stocks in the S&P 500 almost irrelevant.

The monster stocks that each make up 1% or more–often much more–of the total value of the S&P 500 index are what determine the S&P 500’s price. The 39 stocks that each make up at least .50% of its value follow. And a surprising number of the Top 100 stocks ranked by weight in the S&P 500 make up such a small percent of its total value that the only way that those stocks can change the price of the S&P 500 is if entire sectors rise or decline in lockstep.

If Apple’s price drops 10% it will have a far greater impact on the S&P 500’s price than if smaller Large Cap companies like TJX (TJX), Southern (SO), Gilead (GILD), and U.S. Bancorp (USB), each of which has only a .20% share in the S&P 500, all simultaneously see their prices double.

Investors in the S&P 500 and, to a slightly less extent, those investing in all broad market ETFs, need to be aware of the extent to which the S&P 500’s price gains over the past decade have been swollen by the gains of a very few stocks, not more than 50 out of the 505 stocks in the S&P 500 index. Can those stocks keep growing at a rate that drive the S&P 500s price upward?

That is the question each investor in S&P 500 ETFs needs to answer for themselves. If they can’t the next decade could get very ugly.



Read More: A Look Inside SPY And VOO: What’s Changed Since December 31, 2021? (NYSEARCA:SPY)

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