Below, is an interesting illustration is from “Visual Capitalist”. With the news recently that two U.S. companies – Apple and Amazon – both reached a stock market valuation of $1 trillion dollars, they looked back in history to other milestones. A trillion dollars has 12 zeros – $1,000,000,000,000. Incredible.
There are 2 interesting facts to highlight about this milestone. The first is how many companies have not maintained the top position through time. In fact, the first company to reach $100 Billion in valuation in 1995 – General Electric – has struggled mighty recently.
One of the major lessons for their struggle is the change in the energy sector which management did not see coming. The new wave of fracking has hurt their energy business significantly.
That is why we always preach the benefits of diversification to insure that our investment portfolios own the largest companies as well as all the publicly traded companies.
The other interesting fact is the percentage of the individual company valuation in terms of the total stock market valuation. In 1955, General Motors hit the $10 Billion valuation and accounted for 5.3% of the total U.S. stock market which had 2,343 companies.
When Apple reached $1 Trillion this year, the company accounted for only 2.7% of the total U.S. stock market which had 5,186 companies. The last chart highlights how quickly Apple moved from a small company to the largest US company and when the various Apple products were introduced. Apple and Amazon (which soon followed Apple to the $1 Trillion milestone) both highlight the current business area showing promise – technology.
What is even more incredible about Apple’s success is that Apple was just 90 days from declaring bankruptcy in 1997.
Interestingly, Apple is not the first company globally to ever hit $1 trillion in market capitalization. That feat was achieved momentarily by PetroChina in 2007, after a successful debut on the Shanghai Stock Exchange that same year.
The stock price tripled that day to hit the mark, but then the company eventually lost more than $800 billion in valuation as oil prices collapsed and the Financial Crisis set in. Diversification is the key to investor success.