top of page

Q3 2020: Trillion Dollar Companies: Historical Proof There Is Substance Here

Updated: Sep 27, 2022

We are officially in the back half of the year… one that most everyone cannot wait to see come to an end. Everyone except maybe for a handful of tech titans. We’ve said it before, a crisis typically speeds up a change that was already in the works. For the trillion-dollar club, this means an expedited migration to and acceptance of their products/services.

That’s right, I said “trillion-dollar club.” Currently, there are four companies with a market capitalization greater than $1 trillion (see graphic). In fact, Apple, is closing in on $2 trillion rather rapidly. The general reaction of the majority of people is: No Way! These stocks are overvalued! How can it be that a company is worth more than a trillion dollars?!?! Well, it be, and would you believe me if I told you it is not the first time (and probably not the last).

In the early 1600’s, the Dutch East India Company (DEIC) peaked at a market value of 78 million guilders. According to folks much brighter than I, this equates to $8.2 trillion in today’s dollars. DEIC had a monopoly on all Dutch trade in Asia. In addition, the world’s first true financial bubble, Tulip Mania occurred during this period.

For a bit in the 1700’s, the South See Company (SSC) positioned itself has the British version of DEIC. Their valuation grew to $4 trillion in today’s dollars. Their reign ended painfully with the Treaty of Utrecht (for unscrupulous reasons).

In the early 1900’s there was one name synonymous with wealth… John D. Rockefeller. His company, Standard Oil (SO), was the largest company in the country. Prior to 1911 when the Government ordered its breakup, SO had a $1 trillion market capitalization (in today’s dollars).

Rockefeller’s personal fortune would be worth nearly $400 billion today (even with having to break up SO). To put that into context, this country’s richest person is Jeff Bezos, coming in at $185 billion. While we make a big deal about this, it’s not even close to Rockefeller.

More recently, PetroChina (PC) topped out in the $1.7 trillion range (in today’s dollars) in 2008. As oil prices increased from $20 a barrel in 2002 to around $140 a barrel by 2008, PC’s stock price was driven up making it the largest oil company in the world. With the subsequent global financial crisis, PC saw its valuation decline to where it sits today, just over $100 billion.

All of the companies to the right shared one very important characteristic… they dominated

their era’s most valuable commodity. In the 1600’s/1700’s countries were realizing there were goods available in different parts of the world. Therefore, the trade routes were of premium value. The means by which these dominant players became so valuable could be questioned, but they were the top companies, nonetheless.

The same goes from Rockefeller’s control of the United States oil market. Standard Oil’s refining capacity, as well as its pipelines and gathering systems dominated the industry. And this industry was at the forefront of that era’s most valued asset… the many uses for refined oil.

How about the fearsome foursome of today? What is it that makes the stock market place a trillion dollar plus value on them? More importantly, is it warranted? They, like their predecessors are dominating the most valued commodity of this era… Data! More specifically, the use and management of data.

Google is so dominant in search functionality that you no longer search for information, you google it. Amazon is the first and last name in online shopping. While not the largest overall retailer, they are the driving force in the rapid adoption of shopping from your couch. Microsoft has their hand in everything (cloud storage, gaming, productivity software, etc.). And Apple has created an ecosystem that is unlike anything we’ve ever seen.

While actual valuations can be debated amongst these four (i.e., are they under or over-valued), there is one common thread. They have all harnessed data in their respective industries that has vastly improved our lives. Their ability to do this on an ever-increasing scale continues to drive their sales, earnings, cash flow and hence their market capitalizations.

Trillion, is a big number and big word we don’t use often, which is probably the reason most people do a double take when uttered. It’s not often, but as we’ve seen through history pure dominance warrants such a valuation. These days, we just happen to be witnessing not one, but a handful of dominant companies. Proof, that with all the craziness going on around us, we are still living in a great time… maybe the greatest of times.

Note:Nothing contained herein this letter should be considered to be investment advice, research or an invitation to buy or sell any securities. Historical market capitalization figures from Money.com

bottom of page