Source: WSJ
Market is Thinning Out
July 30, 2015 6:30am by Barry Ritholtz
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What was the percentage of gains for the top companies over the past decade or two?
This doesn’t mean that the market is thinning out. After all, the economy only consists of doing search, contacting friends, watching movies, and buying more electronics on your iPhone while making sure that your Hep C is cured. Everything else is extraneous and should be ignored from an economic value standpoint.
The market is not “thinning out”, none of these companies are struggling to make gains. This is simply the internet/global market phenomenon of all the profits being concentrated in a few stars … the same thing occurs in every other performer industry, with a few performers being singled out (apparently by the “wisdom of the crowd”) to receive all the rewards, while the next tier down gets (comparatively) next to nothing.
If you want to participate, at least you know which stocks to own.
But remember, the trend is your friend … until it ends.
The “thinning out” meme also overlooks how many of these market behemoths have grown not only organically but through acquisitions of successful smaller companies which they folded into their operations. Maybe a form of survivorship bias though.
If one were to create a ranking of NASDAQ stocks by their relative share of the total profits generated by NASDAQ companies, the list would likely be quite similar, except for Amazon, which is a cult favorite (that would be the cult of “market share”).