THE WHITEPAPER

PROFIT DYNAMICS

Fact: as of July 2026, half of the S&P 500's profits come from just 23 companies.

That comes from constituent-level data, and it's the opening measurement in Profit Dynamics, the whitepaper that outlines the thesis behind everything we publish at Bowman Macro Research (henceforth “Bowman Macro”).

The argument starts from first principles: strip an equity down to its bare minimum. It's a claim on a stream of future profits. Everything else is packaging.

Profitability is a gate to the S&P 500, but we tested whether profitability actually persists among the S&P 500 membership that existed at each formation date, including the 206 companies that later left the index, profitability-related or otherwise. A company's net-margin rank predicted its rank a year later at 71% accuracy. Two-thirds of top-quintile margin businesses were still top-quintile a year on, showing persistence among large margins.

The whitepaper provides the math for our thesis, but it's clear in the data we gathered that the U.S. stock market is highly driven by Profit Dynamics.

THE CLAIM

Profit Dynamics is fundamentally a story about software eating the world. We believe that it was inevitable for software to eat the world and that AI will eat software (maybe not bad for software stocks, but software as we know will never be the same) because of the feedback loop created with low marginal cost products, global deliverability and operability, and sticky network effects. Software has all of these properties, and the AI-software marriage will amplify these effects.

If the stock market is truly a weighing machine at its heart, and we know that it values earnings as it relates to shareholder benefit, then we can conclude that Profit Dynamics weigh very heavily in future returns.

It is no coincidence then that the current consensus of where earnings are headed is concentrated in the technology sector. However, we also believe that financials, communications, and the broader economy will benefit from this ongoing technological boom.

This is a speculative claim and one that we must test in real time, as our fundamental thesis relies on the future unfolding in an observable pattern.

There was only one solution to that dilemma.

BUILDING THE PROFIT DYNAMICS INDEX

Bowman Macro created two rules-based stock indexes that are tracked daily for research clients:

The BMR Profit Titans Index owns today's profitability: the 30 most profitable large enterprises, earning 43% of all S&P 500 profits, trading at launch at a basket-level forward P/E of 16.5× against 20× for the S&P 500.

The BMR Profit Frontier Index owns the future flow: the 30 names where consensus expects the steepest profit ascent, with look-through forward EPS growth of 47.2% against an S&P 500 median of 10.6%.

Both indexes are reconstituted quarterly, but the launch captured these stocks from the S&P 500.

NO BACKTESTS

There is no backtest. On purpose. It's unfortunate, but it's what's best.

The point-in-time consensus data required to build an honest one doesn't exist in an academically rigorous form, and we refuse to publish a chart we can't defend.

Both indexes launched at 1,000 on July 16, 2026, with a pre-registered test: cumulative total return versus SPY, five years, no benchmark substitution, no after-the-fact risk adjustment.

If they lose, I report it as plainly as I argued the thesis.

Appendix B in the whitepaper goes further and labels every scoring rule as research-supported, adapted, or by design judgment. The Frontier's growth pillar is a purposeful bet, and the paper says so in writing.

If you use equity research in your own work, that appendix is the reason to keep this PDF in the file: every claim sourced, every rule versioned, a fully traced and worked example, and limitations stated with the same confidence as the claims.

GET THE PROFIT DYNAMICS WHITEPAPER

The whitepaper is free for BMR email subscribers.

Subscribing also gets you the weekly Valuation Map, the current-week cross-section of how the market's biggest ETFs are actually priced, every Tuesday.