In the past few years, the S&P 500 Index has had some good results when many investors’ portfolios have experienced lackluster to poor results. Lend me a few minutes and I will attempt to explain this and hopefully provide some light on the subject. A large part of this phenomenon has come from the fact that most indexes are market capitalization weighted.

What in the world does that term mean? Simply that the results for the gigantic companies far outweigh the effect of those with the least values. In the past few years, you may have read about the FAANG stocks. This is an acrostic of these companies: Facebook, Amazon, Apple, Netflix and Google.

The value of these behemoths far outweighs that of the combined value of those in the bottom quartile of companies. Let me give you an example. At yesterday’s market close, Microsoft was actually valued the highest of all those in the 500 Index, at $805.8 billion. The 250th most valuable U.S. company, Verisign, was worth $20.3 billion, and the 500th most valuable, Leggett & Platt, located down in southwest Missouri, was valued at 5.2 billion.

The cumulative value of these largest 500 U.S. companies was over $22 trillion as of year-end 2018, according to Siblis Research Ltd. Microsoft by itself represents almost 4 percent of the total. Smallish Leggett & Platt is only 2.3 ten-thousandths of 1 percent of the total.

So what? Many investment gurus like the late John Bogle, founder of Vanguard, concluded from their study and experience that no one should try to outperform a broad basket of stocks like the largest 500. In the past few years, those mentioned above represented such a large portion of the 500’s value, however they fared virtually determined the general result of the whole basket.

When the bull market falters and loses steam as it began to in late September, the results of individual stocks tend to become more critically important again. From the high point of Sept. 20 through Monday, Jan. 27, the best returns have come from the smaller members of the 500 for a change. Since then the FAANG stocks have lost between 8 and 28 percent of their total values. Apple has performed the worst.

A total of 26 stocks have produced greater than a 10 percent increase in value during that time. Only two companies over $100 billion in value are in this group, McDonald’s and 21st Century Fox. Starbucks is in the top 10 and is worth $90 billion, but the lion’s share of the rest are worth less than $35 billion.

The point is that stock markets are and will always be huge collections of individual companies. When you judge everything by the movements of one or two indexes, even though they may represent the elephants of the jungle, I believe you miss out on many opportunities. This is why there is always great opportunity for those who do their homework and mine for the richest veins over time.

Ron Finke is president of Stewardship Capital in Independence. He is a registered investment adviser. Reach him at rcfinke@stewcap.com.