![\"SpaceX](\"https:\/\/www.newsbeep.com\/ie\/wp-content\/uploads\/2026\/06\/588552d727085ba3903ba9bf899547e1.jpeg\")
SpaceX founder and CEO Elon Musk appears via video before the launch of the company’s initial public offering on June 12. – Getty Images <\/p>\n SpaceX founder and CEO Elon Musk appears via video before the launch of the company’s initial public offering on June 12. – Getty Images <\/p>\n
As the stock market digests SpaceX\u2019s mega-IPO, investors would do well to remember that bigger is not necessarily better.<\/p>\n
This relationship between size and stock-market performance has been largely overlooked in debates about whether SpaceX\u2019s stock is an attractive investment. <\/a>But history teaches us that stocks at or near the top of the market-cap rankings face stiff headwinds due to their size alone.<\/p>\n Most Read from MarketWatch <\/p>\n SpaceX SPCX definitely falls into this category. Its came to market as the sixth-largest U.S. company \u2014 and growing.<\/a><\/p>\n 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\u2019s 10-largest companies.<\/p>\n Over the 40 years from the end of 1980 through the end of 2020 (the latest year for which Research Affiliates calculated this portfolio\u2019s performance), it lagged a world-stock portfolio by 1.8 annualized percentage points. The performances are plotted in the chart below.<\/p>\n This hypothetical portfolio nowadays would contain the familiar megacap stocks including Nvidia NVDA, Apple AAPL, Alphabet GOOG GOOGL, Microsoft MSFT and Amazon.com AMZN. For the year through June 12, the 10 U.S. stocks that at year-end 2025 had the largest market caps posted an average loss of 0.3%, versus an 8.5% gain for the S&P 500 SPX.<\/p>\n Another relevant statistic is the performance of a hypothetical portfolio that each year invests in the U.S. stock with the largest market cap as of the end of the previous year. From the end of 1980 to June 12 of this year, according to calculations from my performance-auditing firm, this portfolio has lagged the S&P 500\u2019s total return by 3.1 annualized percentage points \u2014 8.6% versus 11.7%.<\/p>\n Of course, this portfolio wouldn\u2019t currently own SpaceX, which just went public and is not the U.S. market\u2019s biggest stock. But the portfolio\u2019s market-lagging return nonetheless demonstrates the obstacles that the largest stocks face.<\/p>\n See: How Elon Musk nailed the SpaceX IPO<\/a><\/p>\n The reason the largest stocks struggle to keep up with the market is that on average they are overvalued. Overvaluation causes a stock\u2019s market-cap ranking to rise. Consider the 10 U.S. stocks other than SpaceX with the largest market caps right now. Collectively, their average trailing 12 months P\/E ratio is 68.4, according to LSEG data, versus 25.1 for the S&P 500.<\/p>\n These are just some of the reasons that Research Affiliates several years ago introduced a different way of constructing indices known as \u201cfundamental indexes,\u201d which don\u2019t weight constituent stocks by market valuation. These indices instead base a stock\u2019s index weight on fundamental criteria such as book value, revenue, cash flow, dividends and buybacks \u2014 therefore weighting stocks according to their economic significance rather than investor sentiment. In an email, Robert Arnott, the firm\u2019s founder, said SpaceX is ranked 520th in the firm\u2019s index of large- and midcap U.S. stocks, with a float-adjusted weighting of just 0.0036%.<\/p>\n Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at <\/p>\n More: SpaceX IPO hype is massive \u2014 and the FOMO can ruin your retirement<\/a><\/p>\n – <\/p>\n