Alphabet's Underperformance

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Alphabet’s Underperformance and the Curse of Index Investing

A Tale of Two Stocks Google’s parent company, Alphabet Inc. (GOOG, GOOGL), is often seen as an unstoppable force in the stock market—a tech behemoth that investors rely on. But what if your money was silently bleeding performance while sitting in an index fund tracking the S&P 500? What if, despite holding GOOG, you missed out on the real winners?

Alphabet vs Ralph Lauren

Imagine this: A legendary luxury brand, Ralph Lauren (RL), quietly outperformed GOOG in the last six months. Yet, despite RL’s impressive 53.3% gain, its impact in the S&P 500 was negligible. Why? Because RL represents just 0.2% of the index, while Alphabet (GOOG and GOOGL) commands nearly 4%. This is the paradox of passive investing—you think you own the winners, but in reality, you might just be funding the past, not the future.

The Google Paradox and Passive Investing’s Hidden Cost Passive investing thrives on the illusion that owning the index means owning the best of the market. But this is a flawed assumption. Dominant companies like Google attract capital inflows not because they will outperform, but simply because they are big. Meanwhile, stocks like RL, which actually deliver superior returns, get overlooked due to their small weighting.

This is how your passive index tracking bleeds performance, day after day, year after year, decade after decade, leaving profit on the table. If you were invested in SPY, your pension money missed all of RL’s gains—just as it has missed countless other outperformers before.

Breaking Down the Numbers We analyzed the last six months’ performance of the S&P 500 and found that 25 stocks have outperformed GOOG. Some of these stocks have posted significant gains, with a few exceeding 100% returns over this period. The top-performing stock, Palantir Technologies Inc. (PLTR), delivered a staggering 178.1% return.

To visualize this trend, we created a bar chart that highlights these outperformers alongside GOOG and GOOGL. Interestingly, while many of these outperformers are from the tech and entertainment sectors, a significant number are from industries such as airlines, energy, and apparel.

Bar Chart

Top Performers That Outpaced GOOG

Here’s a list of S&P 500 stocks that have beaten GOOG in the last six months:

  1. Palantir Technologies Inc. (PLTR) – 178.1%
  2. United Airlines Holdings Inc. (UAL) – 109.29%
  3. Tapestry Inc. (TPR) – 106.33%
  4. Texas Pacific Land Corp. (TPL) – 66.77%
  5. Vistra Corp. (VST) – 64.83%
  6. GE Vernova LLC (GEV) – 63.82%
  7. Ralph Lauren Corp. (RL) – 53.3%
  8. Royal Caribbean Cruises Ltd. (RCL) – 52.35%
  9. Axon Enterprise Inc. (AXON) – 49.48%
  10. Warner Bros. Discovery Inc. (WBD) – 48.92%
  11. EQT Corporation (EQT) – 48.73%
  12. Live Nation Entertainment Inc. (LYV) – 48.36%
  13. Gilead Sciences Inc. (GILD) – 48.18%
  14. CrowdStrike Holdings Inc. (CRWD) – 46.96%
  15. Entergy Corporation (ETR) – 45.6%
  16. Netflix Inc. (NFLX) – 44.61%
  17. Carnival Corporation (CCL) – 43.31%
  18. F5 Networks Inc. (FFIV) – 43.21%
  19. Jabil Inc. (JBL) – 42.76%
  20. Expedia Group Inc. (EXPE) – 42.07%
  21. Howmet Aerospace Inc. (HWM) – 41.24%
  22. Fox Corporation Class B (FOX) – 40.73%
  23. Fox Corporation Class A (FOXA) – 39.68%
  24. Fortinet Inc. (FTNT) – 39.18%
  25. Delta Air Lines Inc. (DAL) – 38.99%

And the worst part, it’s easy for statistical systems and AI to identify the outperformers. What Does This Mean for Investors? The takeaway here is that passive investing is not as passive as you think. The index is a game of market cap bias, not meritocracy. The best-performing stocks often have lower weights, meaning their gains don’t translate into higher index performance. This is why, despite market winners like RL, passive investors aren’t truly winning.

Investors looking for high-growth opportunities may need to rethink their strategy. While passive investing may feel like a safe bet, it systematically ignores smaller stocks that could drive real portfolio growth. If you want to stop bleeding performance, it’s time to rethink the passive approach.

The market is always evolving, and as this analysis shows, index investing doesn’t always capture the best returns. MCAP weighting is a broken model that’s easy to beat.

Your money is following an outdated model. The question is—will you keep missing out?

#EndOfPassive

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