29 October 2021

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Will the giants of today be those of tomorrow?

Author: Luigi Campopiano

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Nothing lasts forever: 31/08/2020 Exxon, a historic American oil company, is officially out of the Dow Jones. From 2006 to 2011, Exxon has been the biggest American company in the financial market. So, are we sure that big corporations as Amazon or Apple cannot experience a sudden and rapid decline one day?

A study by the Center for Research in Security Prices (data provider affiliated with the University Of Chicago) says that from December 1925 to July 2020, only 11 of 24.979 companies were able to become the biggest in market cap in the USA. AT&T has been the biggest for the longest period (43% on open day market), followed by IBM (20%), General Electric, and Exxon (12%) General Motors (6%). Other companies: Altria Group (34 days), DuPont (11 days) e Walmart (3 days). 

Source: Wall Street Journal

Three more companies appear in the analysis: Amazon, Apple, and Microsoft. They are leaders and have an impressive market value. But these numbers linked to a technological future are enough to preserve this corp? If we study the theory (life cycle) and observe the reality (what happened until today), the answer appears negative. It doesn’t mean that these companies cannot dominate for a long time, being an excellent investment (although not without risk), but the only evergreen rule in investment in “diversification.”