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Just Another Meme Stock?
By: Russ Kamp, CEO, Ryan ALM, Inc.
Equity markets are partying like it's 1999! Valuations be damned! Are the improved funded ratios for defined benefit plans going to be secured through de-risking strategies or are they going to once again be subjected to the whims of the capital markets? For plan sponsors benchmarking your equity exposure to the S&P 500, are you prepared for the volatility potentially associated with the great technology concentration (now roughly 50% of the index)? For those invested in the Nasdaq indexes, are you prepared for SpaceX's impact, which should happen soon?
Come on, folks. Let's not repeat the mistakes of the past. Higher interest rates, higher inflation, crazy equity valuations, and geopolitical uncertainty have not seemed to tamp enthusiasm for U.S. stocks. What will? Will it take a stock like SpaceX - now valued at $2.75 trillion - to be the reason that stocks fall back to earth? SpaceX has been trading for three days. The action on the stock suggests that it is just another meme stock.
Can you believe that SpaceX has overtaken Amazon as America's fifth-largest company? A closer examination of the fundamentals shows just how irrational our markets/investors have become. Let's look at the current fundamentals of Amazon versus SpaceX.
Valuation
SpaceX’s valuation is being priced as an extraordinarily high-growth story, despite being a money-losing company, which is why its P/S is dramatically higher than Amazon’s. Amazon, by contrast, already has large-scale revenue and meaningful profitability, so its valuation looks much more grounded in current fundamentals, despite it carrying a rich valuation at 34x normalized earnings.
Profitability
Amazon is clearly ahead on earnings quality: it generated $80.0B of operating income and $77.7B of net income in 2025. SpaceX, on the other hand, reported a $9.36B trailing-twelve-month loss and a negative net margin.
Growth profile
Clearly, SpaceX’s case is mostly about future optionality: investors are paying for expected expansion in launch, satellite, and adjacent businesses rather than present-day profits. Amazon’s case is more balanced because it combines growth with profitability, especially from AWS and advertising, which support its margins.
SpaceX will need to increase sales by roughly 37x to match Amazons P/S of 3.5x. Nothing grows to the heavens - even a rocket company. Risks to pension funding seem to be skewed to the downside. It is time to take some profits and secure the promises that have been given to your plan participants. Please don't waste another golden opportunity to fortify your plan's funding.
Milliman: Corporate Pension Funding Highest Since 2007
By: Russ Kamp, CEO, Ryan ALM, Inc.
Milliman has once again released its monthly Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. It would be fascinating to see how these 100 plans differ from a list just 20-years ago.
As for today's members, the Milliman 100 PFI plans showed improved funding by $23 billion during April. These stellar results were driven by strong equity returns as the constituents averaged a 2.13% gain. As a result, the funded ratio dramatically improved from 105.9% at the end of March to 107.8% at the end of April representing the highest level of funding since October 2007, when it stood at 108.1%. Strong investment gains increased assets by $20 billion and now stand at $1.297 trillion, while the projected benefit obligation fell slightly to $1.204 trillion, as the monthly discount rate edged up one basis point, to 5.66% from 5.65%.
"After a flat first quarter, the funding surplus grew to $94 billion at the end of April, primarily due to strong market returns," said Zorast Wadia, author of the Milliman 100 PFI. "This means plan sponsors continue to have more pension risk management options as plans move further into surplus territory."
Plan sponsors would be wise to seek risk reducing strategies. The previous high watermark was achieved in October 2007, just prior to the start of the Great Financial Crisis, which pummeled markets through March of 2009. As the graph below highlights, the Milliman 100 went from a small surplus in the Q3'07 to a major deficit within 6 months. It would be another 13-years before a surplus was once again created.
Plan sponsors should secure the pension promises through a cash flow matching (CFM) strategy and then actively manage surplus assets since they've now created a much longer investing horizon for those assets. Ryan ALM, Inc. is always willing to provide a free analysis of what is possible through CFM.
For the full Milliman report, click on the link below.