Only 20% of US stocks beat the S&P 500 over the last ten years

What we found

Of 1,493 US companies worth $300M or more in September 2016 that still trade, 20% beat SPY over the following ten years and 22% lost money. The median stock grew 2.2 times; SPY grew 4.2 times.

Ten companies made 44% of all the dollars the 1,493 created: Apple, NVIDIA, Alphabet, Microsoft, Amazon, Meta, JPMorgan, Eli Lilly, Micron and Walmart.

The full results

Why the index beats most of its members

Stock returns are skewed. A stock can lose at most 100%, but it can gain thousands of percent, so the average is pulled up by a few huge winners while the typical stock does far less. An index holds every winner in full; a handful of picks will most likely miss them.

Over these ten years, the median stock grew 2.2 times while the average grew 3.3 times. The 15 best performers, 1% of the list, made 48% of the dollars.

What it means for picking stocks

A concentrated portfolio is a bet on finding the few big winners. Most portfolios of five or ten stocks will trail the index, and a few will beat it handily. That is worth knowing before measuring a stock picker, including yourself, against the S&P 500.

How it was measured

• Total returns from September 2016, dividends reinvested.
• Dollar gains are each company’s 2016 market cap times its growth, so the biggest winners count for what they added in value.

Caveats

• Survivors only: companies that went bust or were bought are left out, so the true share beating SPY is lower.

Questions

What share of stocks beat the S&P 500?

Over the ten years from September 2016, 20% of US companies worth $300M or more at the start beat SPY, and 22% lost money.

Why do most stocks lag the index?

Returns are skewed: a stock can lose at most 100% but gain many times over. A few huge winners lift the index, while the median stock grew 2.2 times against SPY’s 4.2.