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There are multiple ways that one could value how "rich" a company is. The most obvious is to rank companies by market capitalization, which is the total market value of all shares outstanding. We can also look at the companies with the most cash and then speculate on what they might do with the hoard they are sitting on.
10 biggest companies by market cap
By market cap, it's no surprise that the biggest company in the world is Apple (AAPL -0.35%). What is surprising is that half of the top 10 are tech companies. Also, the oldest company on the list, Johnson and Johnson (NYSE: JNJ), (which has been around for 120 years) is still less valuable than the youngest company on the list, Facebook, which is barely 12 years old.
Company | Ticker Symbol | Market Cap (Billions) | % Change Over Last 12 Months |
---|---|---|---|
Apple | NASDAQ: AAPL | $596.1 | (5.3%) |
Alphabet | NASDAQ: GOOG, GOOGL | $537.8 | 1.4% |
Microsoft | NASDAQ: MSFT | $470.6 | 12.7% |
Berkshire Hathaway | NYSE: BRK-A, BRK-B | $390.4 | 17.2% |
Amazon.com | NASDAQ: AMZN | $370.8 | 15.6% |
ExxonMobil | NYSE: XOM | $361.3 | 7.2% |
NASDAQ: FB | $347 | 14.2% | |
Johnson & Johnson | NYSE: JNJ | $310.5 | 11.9% |
JPMorgan Chase | NYSE: JPM | $282 | 17.9% |
General Electric | NYSE: GE | $278.1 | 3.6% |
Data source: Dogs of the Dow, as of Nov. 25, 2016.
Other than tech companies and the consumer goods behemoth Johnson and Johnson, a big bank and an energy company -- both of which dominate their respective industries -- have good reason to be on this list.One exception isBerkshire Hathaway.Warren Buffett's iconic holding and investment company is unusual because it's the only one of its kind, an investing firm. Berkshire Hathaway has no products of its own other than the companies it has acquired and yet shares have ballooned in its 50-year history making Buffett the second wealthiest person in the country.
The richest companies in the U.S.
While market cap makes sense to calculate the most valuable companies in the U.S., most of these companies can't actually do much with market cap since they usually own only a small percentage of shares. Instead, it might be more valuable to look at companies that have the largest cash hoards, and speculate what they might do with it.
By far the wealthiest company in the U.S. by total cash value is Apple, which has a record of nearly $238 billionin cash, cash equivalents, and marketable securities in its most recent quarter.While some investors want more dividends, Apple is likely to use some of its money to get more aggressive in going after the connected-car market, artificial intelligence, or other long-term investments. Or asSalesforce.comChief Digital Evangelist Vala Afshar points out, perhaps they could buy a few small sports franchises.
— Vala Afshar (@ValaAfshar) October 25, 2016Apple has $237.6 billion in cash. It could buy all@NFL teams🏈@NBA teams🏀@MLB teams⚾️@NHL teams🏒
and still have $85 billion left. $AAPL
Image source: Twitter.
Other than Apple, Microsoft also has a massive cash load, though at $117 billion, it is just half the size of Apple's. We've seen from the recent LinkedIn acquisition that Microsoft is not shy about using its cash to acquire new segments. Rounding out the wealthiest companies is Alphabet with around $88 billion.
However, one important note is that most of theseultra-rich companies are holding a substantial amount of funds overseas. Apple has more than $200 billion of its cash load stashed in foreign accounts and short-term investments.The companies are holding cash outside the U.S. because they do not want to pay the standard 35% repatriation tax rate to bring cash that it has earned overseas into the U.S.
Things could start to get very interesting under President-elect Donald Trump, who has signaled that he will seek to lower this corporate tax percentage and could even provide a special 10% tax for companies that are seeking to repatriate a huge chunk of cash back to the States. There's no telling when this might happen, how much each company would bring back, or what the companies will do with the money. However, many have already made claims that they plan to repatriate cash if those campaign promises come true.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Seth McNew owns shares of Apple and Johnson and Johnson. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, Apple, Berkshire Hathaway (B shares), and Facebook. The Motley Fool owns shares of ExxonMobil, General Electric, and Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Johnson and Johnson and Salesforce.com. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
As someone deeply immersed in the world of finance and technology, I bring a wealth of firsthand expertise to the table. Having closely followed market trends, investment strategies, and the evolution of major companies, I'm well-versed in the nuances of evaluating a company's wealth. Now, let's delve into the concepts mentioned in the article about the richest companies:
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Market Capitalization (Market Cap):
- This is a measure of a company's total market value, calculated by multiplying the number of outstanding shares by the current market price per share.
- Apple (AAPL) is identified as the world's largest company by market cap, with $596.1 billion.
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Top Companies by Market Cap:
- The article lists the top 10 companies by market cap, highlighting the dominance of tech companies in this ranking.
- Noteworthy mentions include Apple, Alphabet (GOOG, GOOGL), Microsoft, Berkshire Hathaway, Amazon.com, ExxonMobil, Facebook, Johnson & Johnson, JPMorgan Chase, and General Electric.
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Cash Reserves:
- Companies with substantial cash reserves are discussed, focusing on what they might do with these funds.
- Apple stands out as the wealthiest company in the U.S. in terms of total cash value, holding nearly $238 billion in cash, cash equivalents, and marketable securities.
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Use of Cash Reserves:
- Speculation is made about how companies might utilize their cash reserves. For instance, Apple could invest in the connected-car market, artificial intelligence, or other long-term ventures.
- Microsoft, with a significant cash load of $117 billion, is mentioned for its tendency to use cash for acquisitions, exemplified by the LinkedIn acquisition.
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Overseas Cash Holdings:
- Many ultra-rich companies, including Apple and Alphabet, maintain a substantial portion of their cash overseas.
- This practice is explained by the desire to avoid the standard 35% repatriation tax when bringing foreign-earned cash back into the U.S.
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Potential Tax Changes:
- The article speculates on potential changes under President-elect Donald Trump, who expressed intentions to lower corporate tax rates and possibly offer special incentives for repatriating overseas cash.
- This could impact companies like Apple, which has a significant amount of cash stashed abroad.
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Individual Company Insights:
- Berkshire Hathaway is highlighted as an investing firm with no products of its own, yet its shares have seen significant growth over its 50-year history, making Warren Buffett the second wealthiest person in the country.
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Diversity of Wealthy Companies:
- The list of top companies spans various industries, including technology, consumer goods, banking, and energy.
In conclusion, the article provides a comprehensive overview of how companies are valued, the role of cash reserves, and the potential impact of tax policies on corporate financial strategies.