So Apple became the first trillion US dollar company (ignoring PetroChina which some claim reached that level based on securities traded only inside China in 2008 and not on its listed shares in Hong Kong) overnight Thursday.
The way the headlines and news stories treated it, its a big deal – yes, but only so far as milestones are concerned and nothing more. The milestone means very little – it is a more of a so what moment for sharemarket analysts and tragics.
The 22.5% surge this year in the Apple share price is well above the 5.7% rise in the S&P 500 index, the acknowledged measure of US share performance. It rose nearly 8% on Wednesday and Thursday – that’s since the better than expected June quarter earnings on Tuesday.
This performance is due to a number of factors – better than expected results, especially in the June quarter (which is something mostly under the control of management), the Trump tax cut benefits, which is a transfer of wealth from the American taxpayer to Apple management (CEO Tim Cook is now a billionaire just based on his Apple holdings) and shareholders; a multi-billion dollar share buyback which was lifted by $US100 billion four months ago to use up some of the money liberated by the Trump tax cuts, and concerted buying by Warren Buffett’s Berkshire Hathaway which soaked up 75 million Apple shares in the first three months of the year, while Apple bought back just 43 million over the six months to June 30.
But there’s something else to consider – the most valuable stocks in the US don’t last long – in 1967 IBM was worth $US258.6 billion and was the Apple of that year – it was worth $US132 billion on Thursday (and has been abandoned by Warren Buffett who for years treated as one of his most important holdings). Microsoft was the most valuable company over a decade ago – in late 1999 it was worth just on $US619 billion. It has grown since then, unlike IBM, to be valued at $US816 billion at the end of Thursday’s session – but Apple, Amazon ($US877 billion) and Alphabet (Google, worth $US853 billion) are ahead of it.
At one stage General Electric was also to most valuable company in the US for 10 of the 12 years from 1994 to 2006. its market value peaked at over $US420 billion in 2001. It is now worth $US113 billion and slowly fading.
In February 2016, Alphabet briefly passed Apple to become the richest company as investors turned sour on Apple which was struggling with weak sales of its iPhone and problems in China – that didn’t last – it’s also when Warren Buffett sensed an opportunity to climb back on the big tech bus he had missed and started buying tens of millions of shares. His stake is now close to $US49 billion, based on his March 31 stake of 239 million Apple shares.
Cisco, the networking and server company was briefly the most valuable company in the US in the tech and net boom in 2002 when it moved past Microsoft with a market value of $US555.4 billion.
It fell by 75% over the next year and these days it languishes back in the pack worth just over $US196 billion. The way Amazon keeps on growing and invading new markets, it is the candidate to overtake Apple. And the next…?
