4 Horsemen Of Stock ETFs

Own one of these popular equity ETFs? Chances are you also own Apple, Amazon, Facebook and Google.

Reviewed by: Lara Crigger
Edited by: Lara Crigger

Yesterday, Todd Rosenbluth, senior director of ETF and Mutual Fund Research at CFRA, noted on his Twitter feed:

"Own an equity #ETF? Good chance $AAPL is a key holding. A top 10 in 133 different funds. $QUAL $MTUM $SPY $VGT $QQQ $DGRO $EPS $VLUE $IWB"

He's absolutely right. But there are also 1,401 equity ETFs on the market; 133 funds represent just 9% of the total equity ETF universe, meaning Apple isn't exactly ubiquitous.

But the factoid caught my eye for another reason.

ETF.com readers may recall that Apple is one of Scott Galloway's so-called “four horsemen," or companies that have become so large, so successful, that we as investors and consumers let them play by different rules than everybody else on the market.

The other three horsemen are Amazon, Facebook and Google, with Galloway in recent interviews designating Microsoft as a fifth unofficial horseman (see: "These 4 Stocks Are Breaking The Market").

These companies engage in market-breaking behavior, argues Galloway. They pay fewer taxes than other companies, experience less government scrutiny, invade customer privacy with impunity and escape anti-trust laws or regulations. And, says Galloway, we love them for it.

So when I read Todd's tweet, I began to wonder just how frequently the four-sometimes-five horsemen showed up in investors' portfolios. Are we exposed to these market-breaking companies in ways we aren't even aware of?  

In Search Of Whinnies

I pulled the top equity ETFs by assets to determine what percentage of their top 10 holdings comprise Apple, Amazon, Google, Facebook and/or Microsoft.

To ensure I only considered the most popular, well-used ETFs, I limited my sample size to ETFs with $1 billion or more in assets under management (an arbitrary cutoff, to be sure, but I had to stop somewhere).

I also did not look at any holdings in the portfolio beyond the top 10, which may have caused me to miss holdings in the five horsemen companies that fell below the cutoff.

Also, I skipped over leveraged/inverse ETFs, and I considered Alphabet (that is, Google's parent company) Class A and Class C shares together. This is important, because it caused Google to represent a larger percentage of many ETFs' top 10 holdings than perhaps a first glance at the listings would indicate.

As of Nov. 2, 2017, I found 262 equity ETFs with more than $1 billion in assets. Of those 262 ETFs, 60— or 23%—had at least one of the five horsemen in their top 10 holdings. (For a full listing, see the table at the end of this blog.)

In other words, one in four equity ETFs include at least one company that's exhibiting market-breaking behavior. No wonder Galloway's so worried.

The Horsemen Are Everywhere

One thing that immediately jumped out: the horsemen tend to ride as one, so to speak.

For the vast majority of equity ETFs, either all five companies appear together in the top 10, or none of them do. The main exceptions are for quirks of classification: Amazon, for example, is classified under the Global Industry Classification Standard (GICS) system as a consumer discretionary company, not a technology stock (more on that in a minute).

The horsemen appear across a broad range of fund segments. You might expect them to show up in large-caps and tech funds—but they also appear in growth and value ETFs, fundamentally weighted ETFs, even momentum and dividend plays. Pretty much the only equity ETFs they don't reliably appear in are international ETFs and sector slices.

Some examples of just how pervasive the horsemen are:



Do you own growth and value ETFs together? Or complement your U.S. allocation with a total world stock fund? Do you sprinkle some momentum or fundamental plays into your vanilla U.S. exposure? If so, chances are you're double-exposed (or more) to these horsemen companies.

What's important to note, too, is that the horsemen don't appear in these ETFs in trivial amounts. In the 60 ETFs that contain at least one horseman, Apple, Amazon, Facebook and Google—Galloway's crew—together comprise an average 12% of the portfolio. Throw in Microsoft, and that average bumps up to 15%.

One-sixth of a portfolio in just five companies? That's enough to make me look twice.

Amazon's Quirky Classification

I also thought it was interesting that the horsemen didn't show up as I expected them to. Amazon, for example, doesn't appear in the top 10 holdings of the Technology Select Sector SPDR ETF (XLK), but it does, with significant weight, in the Consumer Discretionary Select Sector SPDR ETF (XLY) instead. That's because of the aforementioned GICS classification; Vanguard follows the same standard for its sectors as well.

But Amazon's GICS classification seems increasingly archaic these days, what with the company specifically calling out its cloud computing business, Amazon Web Services, as the driver of its incredible Q3 results.

The reality is that Amazon is no longer just in the business of moving books or clothes or even Kindle tablets. It's in the data business. Amazon streams video through Amazon Video and Twitch.tv; it dominates the voice-controlled personal assistant space with Alexa; it provides online cloud storage and programming services. Amazon fits the description of a consumer discretionary company the same way Iron Man fits the description of a tin can.

Speaking of cloud computing, an interesting aside is that Facebook shows up in the top 10 holdings of the First Trust Cloud Computing ETF (SKYY), but none of the other Horsemen does. (They do, however, appear in the portfolio in smaller weights.)

What Impact From Amazon Singularity?

As far as I understand it, Galloway isn't saying that the horsemen are evil, just that they carry a little extra risk—not the risk that they could implode, but that they could cause markets to implode around them.

In my discussion with him, Galloway talked about a so-called Amazon singularity, in which markets could be made or broken simply through a well-timed press release from the titular company. Amazon decides to enter the retail grocery space? Kroger plummets by a third. Amazon flirts with getting into the pharmacy business? CVS and Walgreens plummet overnight.

The natural result is that, sectors soon aren't moving in relation to what the individual companies within them are doing, but only react to what Amazon is or isn't doing.

I don't know how much I buy it, but I can't stop thinking about it, especially when I see equity ETFs that are dominated by companies that have the ability to move markets around them like a boat creates wake.


We invest in markets under the assumption that they efficiently measure and reflect the fair value of companies participating within them. If that no longer holds true, then one out of every four stock ETFs is, at least in part, driven by a different set of rules that are impossible to know and impossible to predict, except maybe to the companies who are breaking them.

Giddyap, I guess.


Equity ETFs With At Least $1B In AUM & At Least 1 Horseman In Their Top 10 Holdings

% of Top 10 Holdings In…
SPYSPDR S&P 500 ETF Trust$252.63B3.941.811.922.312.712.68
IVViShares Core S&P 500 ETF$133.28B3.921.811.912.642.712.98
VTIVanguard Total Stock Market ETF$86.75B2.711.561.562.162.1810.17
VOOVanguard S&P 500 ETF$77.89B3.651.841.882.632.6412.64
QQQPowerShares QQQ Trust$57.04B12.276.815.988.798.4142.26
IWFiShares Russell 1000 Growth ETF$38.71B7.023.293.394.764.7123.17
VTVVanguard Value ETF$34.38B00004.884.88
VUGVanguard Growth ETF$30.23B6.773.893.885.39019.93
VIGVanguard Dividend Appreciation ETF$25.78B00004.384.38
VYMVanguard High Dividend Yield ETF$20.00B00005.775.77
DIASPDR Dow Jones Industrial Average ETF Trust$19.82B5.0400005.04
IVWiShares S&P 500 Growth ETF$19.44B6.983.233.414.694.8223.13
IWBiShares Russell 1000 ETF$19.26B3.531.631.72.382.3611.6
XLKTechnology Select Sector SPDR Fund$19.15B15.4107.5110.2110.5643.69
VGTVanguard Information Technology ETF$16.10B13.8207.0610.139.4540.46
ITOTiShares Core S&P Total U.S. Stock Market ETF$11.98B3.241.51.582.172.2310.72
XLYConsumer Discretionary Select Sector SPDR Fund$11.58B15.19000015.19
VVVanguard Large-Cap ETF$10.94B3.21.841.832.552.5711.99
SCHBSchwab U.S. Broad Market ETF$10.76B3.281.511.592.172.2510.8
SCHXSchwab U.S. Large-Cap ETF$10.53B3.671.691.792.422.5112.08
VTVanguard Total World Stock ETF$9.69B1.590.80.811.151.115.46
IWViShares Russell 3000 ETF$8.10B3.261.511.572.22.1810.72
ACWIiShares MSCI ACWI ETF$7.94B1.940.890.911.271.286.29
SCHDSchwab U.S. Dividend Equity ETF$6.34B00004.634.63
FDNFirst Trust Dow Jones Internet Index Fund$5.09B07.928.878.99025.78
PRFPowerShares FTSE RAFI U.S. 1000 Portfolio$5.07B2.380001.523.9
OEFiShares S&P 100$4.78B6.22.873.034.174.2820.55
SCHGSchwab U.S. Large-Cap Growth ETF$4.76B7.383.43.64.89019.27
MTUMiShares Edge MSCI USA Momentum Factor ETF$4.60B4.860005.129.98
QUALiShares Edge MSCI USA Quality Factor ETF$4.02B3.7900047.79
IYWiShares U.S. Technology ETF$3.93B18.0608.8212.1612.4751.51
SCHVSchwab U.S. Large-Cap Value ETF$3.77B00004.984.98
FNDXSchwab Fundamental US Large Co. Index ETF$3.35B3.10001.874.97
MGKVanguard Mega Cap Growth ETF$3.29B8.064.644.626.42023.74
IUSGiShares Core S&P U.S. Growth ETF$2.89B6.523.023.184.394.521.61
VLUEiShares Edge MSCI USA Value Factor ETF$2.73B10.08000010.08
GSLCGoldman Sachs ActiveBeta U.S. Large Cap Equity ETF$2.56B3.311.391.462.072.310.53
DGROiShares Core Dividend Growth ETF$2.31B3.040003.046.08
QTECFirst Trust NASDAQ-100 Technology Sector Index Fund$2.24B3.2703.34006.61
RPGGuggenheim S&P 500 Pure Growth ETF$2.21B001.71001.71
VCRVanguard Consumer Discretionary ETF$2.18B12.13000012.13
DLNWisdomTree U.S. LargeCap Dividend Fund$1.97B4.230003.67.83
MGVVanguard Mega Cap Value ETF$1.82B00005.875.87
QDFFlexShares Quality Dividend Index Fund$1.81B3.1100003.11
IOOiShares Global 100 ETF$1.79B7.443.4505.015.1421.04
VOOGVanguard S&P 500 Growth ETF$1.77B6.583.323.394.744.7622.79
DGRWWisdomTree US Quality Dividend Growth Fund$1.72B4.430003.778.2
IXNiShares Global Tech ETF$1.55B12.906.38.678.9136.78
RYTGuggenheim S&P 500 Equal Weight Technology ETF$1.51B001.65001.65
PDPPowerShares DWA Momentum Portfolio$1.47B3.2500003.25
VONGVanguard Russell 1000 Growth ETF$1.42B6.673.373.44.844.6922.97
ONEQFidelity NASDAQ Composite Tracking Stock$1.40B8.114.993.856.45.7429.09
IGMiShares North American Tech ETF$1.31B8.636.667.037.928.6738.91
MGCVanguard Mega Cap ETF$1.29B3.832.
FTECFidelity MSCI Information Technology Index ETF$1.23B14.4807.069.829.4340.79
SKYYFirst Trust Cloud Computing ETF$1.17B004.92004.92
TILTFlexShares Morningstar US Market Factor Tilt Index Fund$1.15B2.351.061.121.511.557.59
IGViShares North American Tech-Software ETF$1.14B00008.358.35
IYYiShares Dow Jones U.S. ETF$1.10B3.431.591.672.312.3711.37
IWYiShares Russell Top 200 Growth ETF$1.08B9.264.294.466.286.2130.5



At the time of writing, the author held AAPL. Contact Lara Crigger at [email protected].

Lara Crigger is a former staff writer for etf.com and ETF Report.