The CRSP U.S. Total Market Index encompasses 3,498 companies listed on American stock exchanges. Notably, the 59 largest companies within this index account for approximately 70% of its total market capitalization. This concentration is highlighted by the impressive valuations of industry giants such as Nvidia, Alphabet, and Apple, which collectively boast a staggering worth of $13.6 trillion.
A more focused subset of these heavyweights is represented in the CRSP Mega Cap Growth Index, which consists exclusively of the 59 largest companies. This index is poised for a potential addition next week: Space Exploration Technologies Corp. (NASDAQ: SPCX), commonly referred to as SpaceX. The aerospace company, founded by Elon Musk, recently went public with an initial public offering (IPO) that valued the company at over $1.7 trillion. However, it should be noted that only about $75 billion worth of its shares were available for trading at launch.
The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK), which mirrors the performance of the CRSP Mega Cap Growth Index, may begin acquiring SpaceX shares as early as June 19. For investors, understanding the current standings and potential future of this ETF is essential.
The leading ten holdings of the Vanguard Mega Cap Growth ETF account for a substantial 68.9% of the fund’s value. These top ten stocks, along with their respective market capitalizations and ETF weightings, include:
1. Nvidia – $4.9 trillion (13.77%)
2. Apple – $4.3 trillion (11.79%)
3. Alphabet – $4.3 trillion (11.55%)
4. Microsoft – $2.9 trillion (8.69%)
5. Broadcom – $1.8 trillion (5.20%)
6. Amazon – $2.6 trillion (5.12%)
7. Meta Platforms – $1.4 trillion (3.90%)
8. Tesla – $1.5 trillion (3.76%)
9. Eli Lilly – $1 trillion (2.82%)
10. Advanced Micro Devices – $800 billion (2.28%)
Despite its tremendous market cap, SpaceX’s float-adjusted market cap—integral to its positioning within the Vanguard ETF—is just $75 billion due to only around 4% of its shares being made available for public trading. This means that, at least initially, SpaceX would rank among the smaller holdings in the ETF, potentially representing merely 0.16% of the fund’s weight.
The introduction of SpaceX into the Vanguard ETF could see substantial changes in the future. With many early investors and employees facing staggered lockup periods preventing them from selling shares for 180 days post-IPO, the number of publicly traded shares is expected to gradually increase. As those restrictions lift, the company’s float-adjusted market cap—and its corresponding weighting in the ETF—could rise significantly.
To expedite the incorporation of newly public companies like SpaceX, the CRSP can fast-track companies that meet certain criteria, including the floating of at least 10% of their available shares or having a projected weighting exceeding 0.005% in the index. SpaceX qualifies for fast-tracked inclusion since it is expected to make up around 0.16% of the Mega Cap Growth Index.
Historically, the Vanguard Mega Cap Growth ETF has outperformed broader market indices, recording a compound annual return of 14% since its inception in 2007. This is significantly higher than the S&P 500’s average annual return of 10.3% over the same timeframe.
While SpaceX’s IPO came with a high valuation, which may carry risks in the short term, its initially modest position within the Vanguard ETF could protect the fund from immediate negative impacts. Investors contemplating whether to buy stock in the Vanguard Mega Cap Growth ETF should take note of insights from the Motley Fool Stock Advisor analyst team, which has identified ten standout stocks for investment, none of which include this ETF. With notable outperformers like Netflix and Nvidia historically appearing on their lists, potential investors might want to explore these recommendations further.
