May 09, 2018
The rich are getting richer. Apple (AAPL), the world’s largest publicly traded company, continues to hit new all-time highs after strong earnings last week and a huge endorsement from famed investor Warren Buffett. During the annual Berkshire Hathaway meeting this past weekend, the Oracle of Omaha said his holding company has purchased 75 million shares of the company.
Berkshire now owns nearly $45 billion worth of Apple, which is a lot of money. In many cases, Buffett’s company would be a 100% owner for that kind of cash. But in the case of Apple, it amounts to just a 5% stake. That’s because Apple’s market capitalization is now $950 billion, making it all but a shoe-in to be the first publicly traded company to be worth $1 trillion. That’s bigger than most countries.
If you bought the stock 10 years ago today and held on, you would have made 955% on your money.
Even with iPhone sales slowing this past quarter, overseas growth and the announcement of a huge stock buyback combined with the Buffett news could be exactly what Apple needs to become the first company to top $1 trillion. It only takes another 5% move from here for AAPL to reach the milestone. And considering it is already up 13% in the month of May, a move of less than half that magnitude appears very achievable in the weeks ahead.
The magic number is $197 per share. When AAPL hits that price, Wall Street can dawn the “Apple Trillion” hats – as it did when the Dow hit 20,000. Did you know you can already buy your Dow 25,000 hat, too? I may skip those, but I definitely need to order my Apple hat!
It’s almost a foregone conclusion that Apple will be the first trillion dollar company, so perhaps a more interesting question is who will be the second. I took a look at some of the other mega-cap stocks that could round out the First Five. Four are pretty well known, but the fifth may surprise you.
Amazon (AMZN), with a current market cap of $780 billion, has the best chance of being the second company to $1 trillion. One way to look at it is that the consumer makes up approximately two-thirds of the economy, and Amazon is the clear retail leader and growing. A 22.4% gain in the stock is needed to reach $1 trillion. That would take AMZN to $1,958.
Alphabet (GOOGL), the parent company of Google, has a market cap of $734 billion. With its exposure to huge NexGen trends like artificial intelligence, self-driving cars, robotics and everything search, I like its chances of being the third company to join the club.
Facebook (FB) is a little further behind with a market cap of $515 million, but it is definitely a reasonable choice to be one of the First Five. However, if I had to choose between it and Tencent Holdings (TCEHY), I would pick the latter.
If you read MoneyWire or subscribe to my newsletters, you probably already know how much I like TCEHY, a Chinese leader in NexGen technology. Last year, it became the first Chinese technology company to reach $500 billion in market cap, beating its better-known rival Alibaba (BABA). A pullback in 2018 has the stock trading with a market cap of $453 billion, and that makes it a true long-term value if I’m right that it will be among the first companies to be worth a trillion dollars.
I was trying to find a smaller tech company for my last pick of the trillion dollar First Five, but I do not see that happening in the next few years. Instead, I’m looking at a large company that so many people have written off over the years – Microsoft (MSFT). The company has a $739 billion market cap and would need a 35% rally to get to the promised land – or $130 per share. Considering that Microsoft is up 39% in the last year, it seems very doable.
I also can’t help but notice how NexGen all of those companies are and how much money they have made people over the years – especially investors who bought in the early stages. We’re talking about life-changing wealth for those who held on, which is why everyone wants to find the next AAPL, AMZN, GOOGL, TCEHY and MSFT. They are out there, and I’m looking harder than anybody. I have trips planned to view some of those future superstars in person, and I’ll report back when I go and what I find.
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