Episode summary
The Buried $150B Bet Inside the Top 20 U.S. Stocks | WSJ’s Take On the Week
The Journal
· · 33 min · Hosts: Telis Demos, Spencer Jakab, Miriam Gottfried · Guests: Kaitlin Hendrix
Summary
The episode argues that investors may already have meaningful indirect exposure to private companies through the public stocks they own, especially the largest U.S. names. Kaitlin Hendrix says the 20 largest U.S. companies, which make up about 40% of U.S. market cap, contain roughly $100 billion to $150 billion of direct private-company investments, including multi-billion-dollar stakes in Anthropic by Alphabet, Amazon and Nvidia. She also says corporate venture arms and subsidiaries, such as Google’s venture unit and Alphabet’s ownership of Flipkart through a subsidiary, extend that exposure further.
The host and analyst push back on the idea that investors need expensive private-market products for diversification. Hendrix argues that public index funds already give broad, cheap access to many of the same economic drivers, while private funds add fees, illiquidity, tax complexity and concentrated manager risk. She says broad diversification across countries and asset types is easier and cheaper in public markets than in private ones.
Spencer’s point is that private-company stakes are also distorting reported earnings at big public firms. He says revaluation gains can make S&P 500 profits look unusually strong even when no cash has come in, and that investors may be treating those paper gains as recurring. Hendrix’s research on about 6,000 private funds finds some diversification benefit, but not a clear, broad private-market premium, and she warns that manager selection and performance dispersion are major hurdles.
Key takeaways
- Kaitlin Hendrix says the 20 largest U.S. companies account for about 40% of U.S. market cap and hold roughly $100 billion to $150 billion of private-company stakes.
- Hendrix argues that an S&P 500 fund can already provide indirect exposure to names like Anthropic, Stripe and Flipkart without private-market fees.
- The host says private-company revaluations are boosting reported earnings at major S&P 500 firms even though no cash is changing hands.
- Hendrix’s survey of about 6,000 private funds found some outperformance in some categories, but little evidence of a broad, easily captured private-market premium.
- Hendrix says diversification is the better reason to consider private assets, but broad public-market diversification is cheaper and more accessible.
Notable quotes
“We looked at the 20 largest US companies, which account by the way for 40% of the market cap in the US”
“Alphabet, Amazon, and Nvidia all have multi-billion-dollar stakes in Anthropic”
“we found about 100 to 150 billion dollars of direct investment in private companies”
“there are so many frictions and costs associated with and it's difficult to get a broad spectrum of private company exposure in your portfolio”
“There's no cash coming in to them. It's, you know, but it shows up”
How the episode opens
We looked at the 20 largest US companies, which account by the way for 40% of the market cap in the US, and we said these companies have exposure to a lot of private companies. Alphabet, Amazon, and Nvidia all have multi-billion-dollar stakes in Anthropic. So, that direct investment is a way that everyday investors who are buying those large public companies can have this indirect exposure to those private companies.
Hi everyone. I'm Tadas Viskanta. Welcome to another episode of WSJ's Take on the Week. We've got uh another special episode. We've been doing a lot of special episodes lately. It's summertime, you know, so you've got to you've got to mix it up. Uh and so I'm joined today by Spencer Jacob. You you've you've heard his voice on WSJ podcast many times. Spencer, welcome.
Hey, thanks for having me. — For those who don't know Spencer, well, Spencer was my editor on Heard on the Street for a long time. And now Spencer writes our morning uh Markets AM newsletter. Uh so, the what what what is your title officially these days?
I'm newsletter guy. — Newsletter guy. Newsletter guy. Okay. — Head newsletter guy in charge. Uh yeah, it's uh still free, by the way, for anyone listening. Just Google Markets AM and you can get it. — Uh it's a fantastic read. I do I do If you're not already getting it, you should absolutely should. Um and so, today we wanted to talk about the reason I brought Spencer in is cuz he wrote something really interesting lately about the role that uh private markets are playing in what's going on in the public markets. And I also came across some really interesting research on this topic from our guest Caitlin Hendricks.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private markets
- corporate venture capital
- index fund exposure
- big tech private investments
- valuation and returns
Companies and tickers mentioned
- GOOGL
- GOOG
- AMZN
- NVDA
- Anthropic
- Stripe
- Flipkart
- Alphabet's Google
- Amazon
- Nvidia
- Dimensional Fund Advisors
Watch the episode
Watch “The Buried $150B Bet Inside the Top 20 U.S. Stocks | WSJ’s Take On the Week” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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