Apple Hits $1 Trillion, Which Company Will Be First To Reach $10 Trillion Milestone?
Let’s say NBA season starts, and you’re asked the following questions. You receive $10,000 for the correct answer and will lose $100 for each wrong answer, with an unlimited amount of guesses. “Which team is going to win the NBA league this season, and who is going to be the finals MVP, and how many points will he average in the Finals (two decimal accuracy)?”. The game could get costly when played repeatedly and soon you would not want to play any more. When you are required to predict with a high level of accuracy, it becomes a formidable task. Something similar happens in the stock market.
With Apple breaking through a $1,000,000,000,000 valuation many are looking for the next company that will hit the next milestone at $10 trillion. Could it also be Apple? Odds are against it, since the first public traded company listed on the stock exchange in 1781, one company has never broken these milestones twice. Moreover, the companies that used to reach the next milestone are usually from completely different industries making the task of finding the next winner much more challenging.
$1 million (1781) — Bank of North America (Financial Institution)
$10 million (1791) — Bank of United States (Financial Institution)
$100 million (1878) — New York Central Railroad (Transportation)
$1 billion (1924) — AT&T (Telecommunication)
$10 billion (1955) — General Motors (Automotive)
$100 billion (1995) — General Electric (Conglomerate)
$1 Trillion (2018) — Apple (Technology)
$10 Trillion — TBD
Being invested in any of these companies as they reached their milestones has manifested itself to be very lucrative. When timed properly with entry and exit it becomes a good story to tell. However, most of these companies did not continue to dominate after breaking their milestones. As the average lifespan of the S&P 500 company is 20 years it is unlikely that companies that currently dominate will continue to do so in the future. Fun fact: Apple is the first company in the US to reach $1 trillion, but not in the world. That place is held by PetroChina in 2007 on Shanghai Stock Exchange. More on PetroChina and what happened with it later.
The main questions are, what is the next big trend, which sector will it impact and then pick the winning company that will reach its $10 trillion mark. This task requires a very accurate prediction, like our basketball example from the beginning, and some investors are turning towards passive money management for the answer. Passive money management through Exchange Traded Funds (ETFs) and mutual funds allows investors to invest in the stock market as a whole, or pick individual sectors (ie technology, robotics etc) that would include the next $10 trillion company in its basket of stocks.
On the other hand, price appreciation when you get the company right is considerably more attractive than owning the whole market or a sector through the ETF. That is also true for losses. Take PetroChina we previously mentioned as an example. The stock successfully debuted on Shanghai Stock Exchange surging up to $1 trillion before the stock lost almost 80% of its value soon after as a result of oil price collapse and Financial Crisis. The market currently favors renewable energy sources which makes PetroChina less in the limelight for investors.
There are around 5,000 stocks traded in the US and more are coming to the market. With technology changing everything from the way we communicate, shop, get around places and more, it is becoming increasingly challenging to pick a company that will remain a dominant player in the winning space. Instead of diving deep down to find the next milestone company, you can own the whole market or specific sector through ETFs and Mutual Funds and utilize passive investing to capture this growth.
You might be asking what are some tools to use to scan the ETF space to put some of your ideas to test. At Threadvest we do exactly that. Stay tuned as we are working on the launch of our website which will be powered by institutional quality data and analysis. More on that in one of the future posts.
To try to answer the question from the beginning of our discussion. Who will win the NBA league this season? Golden State Warriors. Who will be the finals MVP? Steph Curry (Durant already has two in a row). How many points will he average? Uhh…28.59. Maybe I will just buy Golden State Warriors ETF.
For more information on Exchange Traded Funds visit threadvest.com