20 Sep 2023

Aegon Asset Management: Erling Haaland and equity market concentration

Erling Haaland made a blistering start to his football career in England. Two goals against Burnley on the opening weekend of the 2023/24 season took his Premier League record to 38 goals and eight assists in just 36 appearances for Manchester City. He has become a dream Fantasy Football pick, with more than 90% of players selecting him ahead of next weekend’s fixtures.

I am reminded of this set-up with equity markets in 2023. Take Nvidia, for example, its shares have risen 200% this year against an S&P 500 return of 16%. This parabolic move has lifted the value of the company above the $1 trillion mark. For managers of US equity portfolios, not owning Nvidia alone has come at the cost of over 2% relative underperformance this year.

The risk is similar with Haaland. His two-goal return delivered 13 points at the weekend. Many players selected him as ‘Captain’, meaning his score is doubled. Not picking him could be a painful mistake this season. He is the Nvidia of fantasy football.

The comparisons extend to valuation, where Haaland is the most expensive player in Fantasy Football. Players must spend £14m of a £100m budget to select him. In a similar vein, Nvidia shares do not come cheap. Investors value them at a price-to-sales ratio of over 40x, against the broader market multiple of 2.5x.

However, Nvidia is not alone in terms of mega-cap stocks delivering market-busting returns this year. The likes of Apple, Microsoft, Amazon and Alphabet have all risen more than 40%. Tesla and Meta have more than doubled. Collectively, these companies represent a quarter of the index and nearly $10 trillion in market capitalization.

The result is that concentration (a measure of the weightings of the largest stocks in the index) in equity markets has reached extreme levels. Active managers are faced with the prospect of trailing the benchmark should these stocks continue their march higher.

High concentration in the S&P 500 is nothing new. With the emergence of the internet in 2000, the 10 largest stocks made up over 15% of the index. Similar periods occurred in the 1980s with large oil stocks, and before that with ‘blue chip’ stocks in the 1970s. History shows that in concentrated markets, forward returns for the largest stocks often trail the broader market. This can be fertile ground for active managers seeking opportunities outside of the index heavyweights.

Returning to Haaland, he scored 21 goals in the first 16 games of last season, which equates to 1.3 goals-per-game. In the remaining 22 games he scored 15 goals, although underperformed Harry Kane, who scored 17 goals in the same period. Kane has since left for Germany, although his scoring outperformance of Haaland in the second half of last season shows the risks of extrapolating past performance.

Haaland is the firm favourite for the Premier League Golden Boot award this season, meaning that most expect him to keep scoring goals. In the same way, most analysts expect Nvidia to keep performing, with an average price target of over $500 per share. There is a glaring risk of underperformance for fantasy football and equity portfolio managers if these expectations are correct.  

Whatever the trajectories of the English Premier League season or equity markets, both Haaland and Nvidia will continue to provide selection headaches going forward. 


Nvidia is a long-term holding in Aegon AM funds.

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