Big US Stocks’ Q4’20 Fundamentals

The US stock markets have soared over the past year, achieving truly-astounding performance. Vast torrents of newly-created money deluged in, catapulting stock prices radically higher. But this epic flood of central-bank-conjured liquidity has left stock prices massively disconnected from companies’ underlying fundamentals. With each passing earnings season, this incongruity grows ever-more egregious and risky.

Exactly a year ago, the flagship US S&P 500 stock index (SPX) was plummeting in a rare stock panic. Traders were scared of the economic impacts from governments’ mounting lockdown orders to fight the emerging COVID-19 pandemic. Their frenzied selling snowballed, hammering the SPX a catastrophic 33.9% lower in less than five weeks! That included a formal stock panic, 20%+ losses in two weeks or less.

Central bankers freaked out, worrying the negative wealth effects from free-falling stocks would trigger a depression. So led by the Federal Reserve, they started creating and injecting trillions of dollars into their economies. Over just 3.0 months after the dark heart of that stock panic, the Fed rushed to print money so furiously that its balance sheet skyrocketed $2,857b or 66.3% higher! That extreme was wildly unprecedented.

As the Fed intended, a sizable fraction of those trillions of dollars found their way into the stock markets. So by year-end 2020, the SPX had blasted a stupendous 67.9% higher from its stock-panic nadir! For the whole year it rallied 16.3%, incredible performance considering the economic carnage from those lockdowns. Another few trillion dollars of emergency pandemic stimulus from the US government sure helped.

But do the fundamentals of the big US stocks dominating the S&P 500 justify these lofty liquidity-deluge-driven prices? The unthinkably-colossal money flows that blasted stocks vertical in 2020 are going to be dramatically smaller going forward. Last year the Fed ballooned its balance sheet a monstrous $3,198b or 76.8%! Now in 2021 this central bank is doing $120b per month of quantitative-easing bond monetizations.

If the Fed can sustain that despite the serious price inflation that epic influx of new money is spawning, it implies $1,440b of balance-sheet growth this year. According to the US Treasury, last year the federal government’s debt rocketed up $4,547b or 19.6%. Like the fed’s balance-sheet expansion, it is hard to imagine 2021’s deficit spending hitting half of last year’s crazy extremes even with Democrats in power.

So the big US stocks’ underlying fundamentals are more important than ever. These elite companies recently finished reporting their Q4’20 earnings season. Most of them run their accounting on calendar years, and the SEC gives US companies 60 days after year-ends to file fully-audited 10-K annual reports. After every quarter I wade through the latest operating and financial results from the 25 largest SPX stocks.

These behemoths effectively are the US stock markets, commanding a massive 42.5% of the entire S&P 500’s market capitalization! That exceeds the collective weighting of the 445 smallest SPX component stocks. Because of their huge size, some combination of the SPX-top-25 companies dominates almost all portfolios including retirement accounts. So investors need to stay aware of how the big US stocks are faring.

The leading SPX ETFs are wildly popular, led by the gargantuan SPY SPDR S&P 500 ETF, IVV iShares Core S&P 500 ETF, and VOO Vanguard S&P 500 ETF. A staggering $334.7b, $255.9b, and $196.4b of investors’ capital was deployed in these colossal investment vehicles this week! With the stock markets just drenched in euphoria and complacency, this is an exceedingly-important time to watch the fundamentals.

This table outlines key fundamentals of the 25 largest companies in the US stock markets. Their stock symbols are preceded by how their rankings within the SPX shifted in the year since the end of Q4’19. After the symbols these companies’ actual percentage weightings within the S&P 500 at the end of Q4’20 are shown, along with their market capitalizations in billions back when that reporting quarter was ending.

Their market caps, as well as their other fundamental data, are followed by year-over-year changes from the ends of Q4’19 to Q4’20. Looking at market-cap changes offers a purer read on companies’ values than stock-price changes, normalizing out some manipulative effects of corporate stock buybacks. They are done to artificially boost share prices and earnings per share, maximizing executives’ compensation.

Quarterly revenues, GAAP corporate profits, earnings per share, trailing-twelve-month price-to-earnings ratios as of quarter-end, dividends paid, and operating cash flows generated are shown. These key data are also followed by YoY changes. Blank fields usually mean a company hadn’t reported that particular data as of mid-week, but that didn’t happen this time with the SEC’s annual-reporting deadline now passed.

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