This is an in-your-face rudimentary piece, analysing the companies with highest market capitalization in the world. The “analysis” is limited to tracking of the market cap Top 10 over the last 3-4 years as well as some juxtaposition with Fortune 100 List (by revenues).
Super 7 : OK…so as many of you would be aware of, there has been a change in the world order of most valuable companies in the past 2-3 years. The Super 7 “Consumer Internet/Tech companies” (FAGAM – Facebook, Amazon, Google, Apple, Microsoft and the Chinese entrants – Alibaba and Tencent) have been in the Top 10 for the past 2 completed quarters – CY2017 Q1 and Q2!! We loosely club Apple and Microsoft also in this group, given their stratospheric growths following the explosion of Internet penetration through smartphones and browsers. Barring Microsoft and Apple, all 5 companies would not have been around 25 years back!
Top 3 : Of the 7, the old two – Apple and Microsoft have been in the Top 10 for the past 27 quarters at least (I have data since 2011). Google (name changed to Alphabet in Q42015) joined them in Q2,2013 and hence has been in the List for the past 18 quarters flat. For the last 9 quarters, these 3 companies have been in Top 3 of the List, and in the order of Apple, Alphabet and Microsoft!! Google overtook Microsoft in Q3, 2015 and has stayed at No. 2 ever since!
The latest completed quarter – Q3, 2017 had the following rankings :
- Berkshire Hathaway
- Exxon Mobile
- Johnson & Johnson
Old world companies : Berkshire, Exxon and J&J form the minority in the Top 10 from “old world” companies. Let’s see how the top order looked like in the past few years…going back to the 4th quarters of the past few years…in Q4,2016, the other old world companies in Top 10 besides these 3 were JP Morgan Chase, GE (remember?), Wells Fargo (Amazon was the 4th Internet company in the List). This Top 10 List was identical a year back in Q4,2015. In Q4,2014, Petro-China and ICBC figured instead of GE and JP Morgan Chase in 2015. Walmart was there instead of Amazon (poetic justice J).
Hope the above gives a flavor of the biggies of the old world, which had ruled this List for a few decades, and how swiftly the order has changed in the past 2-3 years!!
Market cap vs Revenue : Just as an academic exercise, we juxtaposed the above List with the Fortune 100 List based on revenues. Walmart is the biggest company in revenue, followed by three Chinese Govt companies, followed by Toyota, Volkswagen, Royal Dutch Shell.
In the Top 10 of this List, we find three of our old “valuable” friends – Berkshire at No. 8, Apple at No. 9 and Exxon at No. 10. None of our other 7 in Top Market Cap companies figure even in the Top 20 of Fortune List. Amazon is the next one to come 26th!!
So, obviously, there’s a current disconnect between revenues and market capitalization. People are betting the currently higher-valued companies are going to grow much faster than the currently higher-revenue companies, for a long, long time. At some point of time of course, profits or profitability of these valuable companies need to start shooting past the current Goliaths of revenue!
Amazon has done to Walmart what Walmart did to other retail stores 30-40 years back. Microsoft has out-paced Intel and IBM and Dell. History of Top 10 has been very colourful. Super 7 cannot take their seats for granted. Having said that, the avg market cap of top 6 Internet companies is 625bn USD vs 350bn for the top 4 old world companies. Some feel that the gap is too big to be bridged easily and soon. But then history has been a cruel teacher…
(As we publish this blog based on Sep 30 rankings, I see that Oct 31st ranking has seen Alibaba overtake Berkshire!!).