In addition to being one of the most widely followed benchmarks in the world, the S&P 500 also serves as the basis for the world's largest ETF. Between SPY, IVV and VOO, there is more than $160 billion linked to this index in U.S.-listed ETFs, significantly more than any other benchmark .

Most investors know that the S&P 500 includes exposure to the largest U.S.-listed companies, giving the biggest weights to the most valuable companies. But that's not entirely the case; the cap-weighted methodology used by S&P makes an adjustment for the free float outstanding. In other words, it excludes shares deemed to be locked inheld by the government, restricted insiders or otherwise unable to be publicly acquiredfrom its calculation .

In many cases, that hardly puts a dent in the value of the company. But in others, it can be more significant. Below, we highlight a handful of companies that have a huge number shares locked in, resulting in a considerably smaller allocation in the S&P 500 (and therefore related ETFs) than they would otherwise command:

Companies

Rank by Market Cap

Rank In SPY

Apple 1 1
Exxon Mobil 2 2
Google 3 9
Walmart 4 22
Microsoft 5 6
Berkshire Hathaway 6 14
General Electric 7 3
IBM 8 5
Chevron 9 4
Johnson & Johnson 10 7

1. Wal-Mart Stores: With a total of 3.35 billion shares outstanding, this multi-national retail corporation founded only 50 years ago has reinvented how people shop for consumer goods. But 1.72 billion of these shares are deemed to be locked in, primarily held by members of the Walton family who routinely dominate Richest American lists (in2011 six members of the Walton family together had the same net worth as the bottom 30% of American families combined about $100 billion).

SPY does hold a whole bunch of Wal-Mart shares, but would hold considerably more if there was no float adjustment. Despite being the fourth-largest company by market cap, WMT isn't found in the top 20 of the S&P .

WMT is the top holding in several consumer-focused ETFs, including the Market Vectors Retail ETF (RTH) and Consumer Staples Select Sector SPDR (XLP).

2. Berkshire Hathaway:This conglomerate holding company is probably best known for its CEO, Warren Buffet, and his impressive track record in the investing world. Of the 1.66 million shares outstanding, only about 1.27 million are available for purchase on the market. As such, BRK also has a major reduction made when its place in the S&P 500 is determined. These 390,000 shares are primarily used by Buffett's investing groupand have helped him amass a fortune of over $44 billion by 2012, good enough to claim third place on Richest People lists.

Berkshire is one of the six biggest companies by market cap, but barely makes it into the top 15 for the S&P 500.

3. Google: With 80% of the 328.59 million shares outstanding publicly floating, the internet giant has a large number of restricted shares set aside for founders Larry Page and Sergey Brin, and other insiders. There are also a number of shares tied up in Google.org, the not-for-profit philanthropic organization that is primarily funded by the remaining locked in shares .

Google is the third-largest company by market cap, but currently occupies the #9 spot in the S&P 500.

Disclosure: No positions at time of writing.

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  5. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  6. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  9. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Oil&Gas Explor&Prodtn

    Learn about the iShares U.S. Oil & Gas Exploration & Production ETF, which provides an efficient way to invest in the exploration and production sector.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Fractal Markets Hypothesis (FMH)

    An alternative investment theory to Efficient Market Hypothesis ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Sucker Yield

    When an investor has essentially risked all of his capital for ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!