The R&D Index: Market Watch for the week ending July 15, 2016 closed at 1,513.12 for the 25 companies in the R&D Index. The Index was up 2.54 percent (or 37.5 basis points) over the week ending July 8, 2016, or a gain of +6.81 percent over the past three weeks. All, but one stock (Novartis, -0.63 percent), gained value for the week from +0.12 percent (Johnson & Johnson) to 7.83 percent (Daimler).
Analysts noted several factors, most of them consumer-based influencing the recent rise in U.S. stocks. Retail and restaurant sales rose 0.6 percent in June and were up 2.7 percent from June 2015. Consumer spending rose across most categories, but sales at building supplies stores had its largest one-month increase in more than six years. Second-quarter retail sales were up 1.4 percent over first quarter and first half 2016 sales were up 3.1 percent over the first half of 2015. Industrial production also increased 0.6 percent in June, the largest jump in nearly a year, while factory output increased 0.4 percent, reflecting an increase in motor-vehicle production. Last week’s report on increased job creation also lent further credence into the possibility of a Federal Reserve rate increase, possibly as early as September. All of these resulted in the record high DJIA ending last week with Futures sales indicating more increases in this coming week.
Part of this recent stock rally is being powered by corporate stock buyback programs, which drive up share prices and improve per share earnings by reducing the number of outstanding shares. Outstanding shares in the S&P500 have actually fallen this year compared to 2015 levels following more than $160 billion in buybacks in the first quarter by S&P companies.
In the attached R&D Index listings, the R&D spending values have been updated this week, reflecting an increase of $5.3 billion or 3.1 percent over a similar value for last year. The rankings have also been adjusted with five of the 11 biopharmaceutical members of the R&D Index showing reduced R&D spending in 2015 and a subsequent drop in their overall R&D Index rankings. Biopharma with reduced R&D include Novartis, Pfizer, Merck, Sanofi and GSK. Other companies with reduced R&D include Daimler, Ford, IBM, Siemens and Ericsson. Fifteen of the 25 R&D Index companies were expected to increase their R&D spending in 2015.
Three relative newcomers to the R&D spending community with ‘soft’ product lines (primarily software-based) include Amazon ($12.5 billion in 2015 R&D), Alphabet/Google ($12.3 billion) and Facebook ($4.8 billion). These three companies are expected to continue to increase their R&D spending at substantial levels over the next two years (Amazon, +18 percent/yr.; Alphabet, + 13 percent/yr. and Facebook, +20 percent/yr.), substantially exceeding the rate increases of the more ‘traditional’ R&D Index companies (biopharma, automotive and ICT).
| Ticker | Exchange | 2015 R&D billions$ | 07/08/16 | 07/15/16 | 7/15/16 to 7/8/16 | 7/15/16 to 1/1/16 | ||
| 1 | Microsoft | MSFT | NASDAQ | 12,448 | 52.30 | 53.70 | 2.68% | -3.21% |
| 2 | Intel | INTC | NASDAQ | 12,128 | 34.00 | 35.07 | 3.15% | 1.80% |
| 3 | Roche Holdings | RHHBY | OTC | 10,242 | 32.36 | 32.50 | 0.43% | -5.72% |
| 4 | Toyota | TM | NYSE | 9,112 | 102.07 | 108.82 | 6.61% | -11.56% |
| 5 | Johnson & Johnson | JNJ | NYSE | 9,046 | 122.85 | 123.00 | 0.12% | 16.49% |
| 6 | Novartis | NVS | NYSE | 8,935 | 82.13 | 81.61 | -0.63% | -5.19% |
| 7 | Apple | AAPL | NASDAQ | 8,397 | 96.68 | 98.78 | 2.17% | -6.16% |
| 8 | Pfizer | PFE | NYSE | 7,690 | 36.12 | 36.77 | 1.80% | 13.52% |
| 9 | General Motors | GM | NYSE | 7,500 | 29.66 | 30.77 | 3.74% | -9.53% |
| 10 | Merck & Co. | MRK | NYSE | 6,704 | 59.35 | 59.63 | 0.47% | 12.89% |
| 11 | Ford Motor | F | NYSE | 6,700 | 13.09 | 13.57 | 3.67% | -3.69% |
| 12 | Cisco | CSCO | NASDAQ | 6,411 | 29.26 | 29.82 | 1.91% | 9.79% |
| 13 | Oracle | ORCL | NYSE | 6,042 | 40.87 | 41.77 | 2.20% | 14.34% |
| 14 | Astra Zeneca PLC | AZN | NYSE | 5,997 | 30.11 | 30.24 | 0.43% | -10.93% |
| 15 | Honda | HMC | NYSE | 5,990 | 25.09 | 26.47 | 5.50% | -17.10% |
| 16 | Bristol-Myers Squibb | BMY | NYSE | 5,920 | 75.28 | 76.00 | 0.96% | 10.47% |
| 17 | Qualcomm | QCOM | NASDAQ | 5,833 | 54.19 | 54.75 | 1.03% | 9.54% |
| 18 | Sanofi SA | SNY | NYSE | 5,519 | 40.85 | 41.68 | 2.03% | -2.27% |
| 19 | Eli Lilly Co | LLY | NYSE | 5,331 | 79.66 | 80.22 | 0.70% | -4.77% |
| 20 | GlaxoSmithKline | GSK | NYSE | 5,250 | 43.38 | 43.92 | 1.24% | 8.85% |
| 21 | IBM | IBM | NYSE | 5,247 | 154.46 | 159.78 | 3.44% | 16.14% |
| 22 | Daimler | DDAIY | OTC | 5,169 | 54.15 | 58.39 | 7.83% | -25.04% |
| 23 | Siemens | SIE | XETRA | 4,929 | 89.24 | 94.20 | 5.56% | 4.81% |
| 24 | Bayer AG | BAYN | XETRA | 4,649 | 90.92 | 93.89 | 3.27% | -19.20% |
| 25 | Ericsson | ERIC | NASDAQ | 4,124 | 7.56 | 7.77 | 2.78% | -19.15% |
| Total | 175,313 | 1475.63 | 1513.12 | 2.54% | -0.56% | |||
| Biopharmaceutical | 693.01 | 700.46 | 1.08% | 0.83% | ||||
| Automotive | 224.06 | 238.02 | 6.23% | -15.29% | ||||
| ICT | 461.76 | 473.67 | 2.58% | 6.10% | ||||
About the R&D Index/Market Pulse
R&D Magazine’s R&D Index is a weekly stock market summary of the top international companies involved in research and development. The top 25 industrial spenders of R&D in 2014 were selected based on the latest listings from Schonfeld & Associates’ June 2015 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT (7) and conglomerate (2) organizations who invested a cumulative total of more than $170 billion in R&D in 2014, or approximately 10.8% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine’s 2014 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in R&D Magazine’s R&D Daily eNewsletter.
The companies used in the R&D Index include Microsoft, Intel, Roche Holdings, Novartis, Johnson & Johnson, Pfizer, Toyota Motor, General Motors, Merck & Co., Ford Motor, Cisco, Apple Computer, Sanofi SA, Qualcomm, IBM, Astra Zeneca plc, Honda Motor, Daimler, Oracle, GlaxoSmithKline, Siemens, Eli Lilly Co., Ericsson, Bristol-Myers Squibb and Bayer AG. Stock prices are based on those stocks traded on the U.S. exchanges. R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.3 and $11.7 billion annually on their R&D efforts.
