After watching Blackstone’s goofy 2023 holiday video spoofing on Taylor Swift last week, click here to view for yourself, I was reminded of a book I read a few months ago.
Our Lives in Their Portfolios by Brett Christophers details the subtle yet significant capital shift from banks to asset managers that took place, and is still under way, after the Great Recession 15 years ago.
The book covers a vast array of themes, and I want to unpack one of them in the coming weeks – the chorus from song in the video above, “we buy assets and make ‘em better” – because it’s wrong. We’ll get to that in the next few weeks.
But at one point, Christophers says something baffling that very few probably know…
Three companies own, on average, 20% of every company in the S&P 500.
No kidding. Test it for yourself.
I take most of my quick stock metrics from Yahoo! Finance (it’s, in my opinion, the best resource out there for that), but you can find the biggest holders of companies on nearly every financial information website.
Take a look at Apple (AAPL)…
And Microsoft (MSFT)…
Here’s Why It Matters: Now, just like in Congress, if one party has 20% of seats, they can’t really make or break any decision by themselves.
But they can still influence them.
And because money leads to influence and that’s what we’re talking about here, these companies can largely influence the plans, the research, and the funding of every business on the S&P.
If you’re a company and don’t want to comply with Blackrock’s wishes to be environmentally friendly with your new venture, what will you do when Larry Fink pulls half of what they own in your company… potentially tens of billions of dollars?
Bottom Line: In this story, playing into small-cap companies, typically under $20 a share, who aren’t held by these institutions - yet have good growth prospects - can be a great way to make money.
A lot of institutions have rules that say they can’t invest in small companies because it’s too speculative (and putting $1 billion into a $100-million firm will push up share prices… high). But once those small companies cross a certain threshold, institutional money pours in.
So, buying into the companies before Blackrock, State Street, Vanguard, or others own them can be a profitable move in the long term.
CJ is great with these types of plays, too, but we’ll talk about specific small-cap companies in the coming weeks because I think they’ll be some of the biggest beneficiaries of lowered rates in 2024.