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Y241207 / A side-by-side evaluation of the 7 largest companies by market capitalization in the U.S. as of December 2024 /
The top 7 companies by market capitalization in the U.S. as of December 2024 are AAPL, NVDA, MSFT, AMZN, GOOG, META, TSLA – in that order largest to smallest. We shall review below some of the unique attributes of these magnificent market multipliers.
COMMENT: There is no denying these beauty contest winners are highly unique and have bright futures. We simply wish to illustrate some fundamental discrepancies that give us pause on a few of the companies.
1 Total Market Capitalization as a % of U.S. GDP
For reference, the first U.S. company to reach a $1.0bn valuation was U.S. Steel in 1901.
At that time (1901) U.S. GDP was $22.9bn (nominal) and, therefore, for a brief period U.S. Steel was 4.4% of U.S. GDP.
COMMENT: A few of the companies are well above 10% of U.S. GDP. The valuation for AAPL is essentially GOOG plus META. The valuation for NVDA is essentially AMZN plus TSLA.
2 Market Capitalization vs. Cash from Operations (sum of L5Yr period)
COMMENT: This provides a nice illustration of the cash generation, or lack thereof, of these companies. While CFO is an imprecise measure it certainly illustrates there are a couple of our magnificent companies that are fetching very high multiples relative to their actual cash generation. It is truly impressive that AAPL, MSFT, and GOOG have generated ~$500bn in Cash from Operations in just 5 years, each. For perspective, there are only 12 other companies in the U.S. that are larger than $500bn and these three companies each produced that quantum in cash, in only 5 years.
3 Cash from Operations 2020 vs. Q3 2024 (sum of L5Yr period for both points)
COMMENT: When comparing the last 5 years of Cash from Ops. in 2020 to the last 5 years of Cash from Ops. in Q3 2024, there appears to be one particular company that has slowed the pace of growth materially more than the rest. Further, the two companies showing over +400% growth over this time period will almost certainly have a challenging time maintaining such a pace.
4 Repurchases and Dividends as % of Cash from Operations (sum of L5Yr period for all points)
COMMENT: At YTB we would hope the companies are returning all this cash to investors, preferably in a tax advantaged way or via cash dividend, while reinvesting a portion into highly promising and high-yielding expansion projects. Unfortunately for us, only a couple of these companies are aligned on that idea.
good read! I was curious about the history of US Steel and looked up that it was JP Morgan who financed the merger in 1901. Side note: JP Morgan was born in Hartford, CT