While it is probably inaccurate to call investors’ search for returns fashionable, over the years there have been significant shifts in appetite for particular stocks. In 2001, for example, General Electric was the largest U.S. company, with a market cap of $406 billion (in 2020 dollars). GE’s market cap in late December of 2020 is less than one-quarter of that.
Five years later, in 2006, Exxon Mobil held the top spot with a market cap of $446 billion, and five years after that, the oil and gas giant was still the largest, although its market cap had dipped to $406 billion. Now, Exxon’s market cap has fallen to below $200 billion.
In 2020, there are just 38 U.S.-traded firms with a market cap above $200 billion, and just nine with a market cap above $500 billion. At the top, four companies are valued at $1 trillion or more, and all four are technology companies.
In August of 2018, Apple Inc. (NASDAQ: AAPL) became the first public U.S. company to reach $1 trillion in market cap. Two years later, the stock had doubled again and the market cap reached $2 trillion. The company’s market cap in late December 2020 is $2.14 trillion. Since 2010, Apple shares have appreciated by more than 1,150%. This year alone the stock is up 72%.
Since 2013, Apple has returned around $500 billion to shareholders in dividends and share buybacks, the largest capital return of any U.S. company, ever. In its 2020 fiscal year ended in September, Apple paid $14.1 billion in dividends and repurchased $72.4 billion in common stock. The company’s goal is to become cash neutral, and at the rate it is going, that is likely to happen sometime in 2023. After that, dividends will be paid out of cash flow.
Over the past 12 months, Apple stock has traded at around 36.8 times earnings. The price-to-earnings (P/E) ratio is expected to drop to 31.4 for the 2021 fiscal year, 28.8 for fiscal 2022 and 26.3 for fiscal 2023.
Microsoft Corp. (NASDAQ: MSFT) was the first of the big tech firms to shoulder its way into the 21st century’s most valuable companies. In 2001, just before the dot-com crash, Microsoft’s market cap was $365 billion, second only to GE. Five years later, that market cap had dwindled to $293 billion, still good enough for the fourth-highest valuation that year. Microsoft’s current market cap is around $1.66 trillion, trailing only Apple. The company’s stock has appreciated by nearly 900% since 2010 and trades higher by about 40% for the year.