Six percent of companies make 50% of U.S. profit
Investors see danger in expecting so few companies to deliver
Some investors see danger in so few making so much.
As corporate earnings were shrinking in 2015, an elite group of U.S. companies found a way to grab a bigger piece of the smaller profit pie.
Just 28 companies collectively hauled in more than half the total net income reported by U.S-based companies in the Standard & Poor’s 500 last year, according to a USA TODAY analysis of data from S&P Global Market Intelligence.
The analysis includes 462 U.S.based companies that have reported their net income for calendar year 2015.
Seeing such a small group of companies generate such a high percentage of the nation’s total corporate net income is noteworthy as it shows how profits have gotten more concentrated. In 2014, 52 S&P 500 companies generated half the overall corporate profit within that index.
“You have a concentration of business in the hands of a small number of players,” says Jack Ablin, chief investment officer of BMO Private Bank.
This shift of profit into the hands of a shrinking group of companies is a danger for investors, who are now counting on fewer companies to deliver to keep the markets rising, Ablin says. “It’s the opposite of diversification,” he says. “You’re now concentrated.”
These companies also have greater financial resources to sway lawmakers to make policy decisions that benefit them more, Ablin says.
Total net income in 2015 fell 15% among the 462 U.S. companies that have reported calendaryear results, based on data from S&P Global.
Much of the drop is due to massive declines in profit from oil companies, including a $23 billion net loss from energy exploration company Apache.
This analysis uses companies’ reported net income, which includes all charges and gains and does not strip out unusual items.
Yet even when results are adjusted and unusual gains and losses are left out, 2015 was a down year.
Total adjusted profit in the S&P 500 has declined 0.7%, excluding unusual charges that Wall Street analysts typically ignore, S&P Global says.
“You have a concentration of business in the hands of a small number of players.” Jack Ablin of BMO Private Bank