As the stock market digests SpaceX’s mega-IPO, investors would do well to remember that bigger is not necessarily better.
This relationship between size and stock-market performance has been largely overlooked in debates about whether SpaceX’s stock is an attractive investment
But history teaches us that stocks at or near the top of the market-cap rankings face stiff headwinds due to their size alone. Most Read from MarketWatch SpaceX SPCX definitely falls into this category. Its came to market as the sixth-largest U.S. company — and growing.
Research Affiliates, the investment advisory firm, studied the performance of stocks with the largest market valuations. The firm constructed a hypothetical portfolio that each year owned the world’s 10-largest companies. Over the 40 years from the end of 1980 through the end of 2020 (the latest year for which Research Affiliates calculated this portfolio’s performance), it lagged a world-stock portfolio by 1.8 annualized percentage points.