Change is evolution, and it’s a thing that’s always happening. I wanted to see the concept in action, so I went looking for some historical perspective. I figured a list of the “top ten” stocks in the S&P 500 would be a good place to start. The results were interesting to say the least.
Aside from the everchanging names, a couple of items that jump off the page to me are the Energy sector and General Electric. In 1980, 7 out of the top 10 companies were Energy/Oil holdings and held a 28% weighting of the overall index. Today there is not one company from the energy sector in the top 10 and it holds a mere 2.5% weighting in the index. As for GE, it consistently held a top 10 spot over this 25-year period. It even was the number one weighting from 1995-2005. Ten years as the largest position in the S&P500 and today it doesn’t even crack the top 100. This traditional powerhouse company has watched its share price fall nearly 75% over the past 5 years. Many of the factors that attributed to this, were due to the company getting over their own financial “skis”. Their balance sheet was too opaque, and their ventures were not properly monitored nor controlled. A healthy company which once captured investors with attractive dividends, now only pays out a penny per quarter. Its dividend growth, which is a strong metric of the health of a company’s balance sheet, has been cut close to 65% in the last three years. The company has been forced to sell poor performing sectors they ventured into and return to their roots of manufacturing.
So, what does that mean for the investor? As the old adage claims “control the controllables”. Make sure your “life” and financial balance sheet is sound. Change is a natural part of life and ultimately inevitable whether we are experiencing a global pandemic or not. As history shows us, today’s leaders may be tomorrow laggards. It is important to not fight change but embrace it. This applies to all aspects of life, including the personal side. Bolster those things that are on your “to do list” or keep you at night. Health, Fitness, Diet, Reading, Budgeting, Financial planning, etc. Let’s all come out of this disruptive change in a stronger and better place. As always if you need anything don’t hesitate to reach out.