US companies dominate
December 29, 2015
Apple, Google's parent company Alphabet, Microsoft: Those are the three most valuable publicly traded companies in the world, according to a study by Germany's leading financial newspaper "Handelsblatt" and the global accountancy Ernst & Young that was published on Tuesday.
As of Monday, the three companies were respectively worth 549 billion euros ($600 billion), 474 billion euros and 405 billion euros.
Positions four through 10 in stock market value were taken by Berkshire Hathaway, the diversified investment holdings company founded by famed US investor Warren Buffett; Texas-based Exxon Mobil, the world's biggest non-government-owned oil company; Amazon, the online retailer; Facebook; General Electric; consumer products giant Johnson & Johnson; and Wells Fargo, a US bank headquartered in San Francisco.
In eleventh place there's a Chinese bank, ICBC, the Industrial and Commercial Bank of China, followed by US bank JP Morgan Chase in twelfth. The top three European companies are all Swiss: Pharmaceuticals company Roche in 13th, food products maker Nestle in 14th, and another pharmaceuticals firm, Novartis, in 16th.
Information technology ascendant
Strikingly, all three of the world's topmost companies, and five of the top 10, are American infotech enterprises.
"Digitalization spans all business sectors and aspects of life - there's still an enormous growth potential, not only for individual companies, but also for entire economies," said Thomas Harms, an Ernst & Young partner.
Two of the top 10 companies, Amazon and Facebook, have a very high share price to earnings ratio, but that doesn't necessarily mean they're overvalued. Both companies are relatively young and investors appear to have faith that their earnings will strengthen over time, to justify the high P/E ratio.
USA! USA! USA!!! And rising China
The US is home to 54 of the top 100 most valuable publicly traded companies, the study shows. Only 26 of the top 100 companies are European.
Eight of the top 50 most valuable stock market traded companies are Chinese. A total of 17 Asian companies are in the top 100 of the global rankings.
In contrast, none of the top 50 are German. There are only six German corporations listed in the top 100, with chemicals and pharmaceuticals giant Bayer AG at the top of the German list at position 66 in the global ranking, followed by business software giant SAP at 73, carmaker Daimler at 81, diversified engineering firm Siemens at 88, Deutsche Telekom at 92 and insurance giant Allianz at 95.
Volkswagen: Down, but certainly not out
Volkswagen Group, which is neck and neck with Toyota in terms of global sales revenues, fell out of the top 100 most valuable companies in the wake of the emissions fraud scandal that broke in September. Toyota, by contrast, is in position 21 in the global stock market valuation ranking, just one notch below China's Alibaba, an online marketplace.
This suggests that VW Group is undervalued, and may represent a handsome buying opportunity for investors willing to buy shares now and hold them for a few years. Sales remain strong, and there's no reason to imagine VW's valuation won't recover once the company has worked off the financial liabilities contingent on the emissions scandal.
Public vs. state-owned vs. privately held
It's worth noting that the rankings only apply to companies whose shares can be bought and sold by anyone on stock markets, i.e. "publicly traded" companies.
There are two other categories of corporation that include huge companies with giant revenues, but whose shares aren't publicly traded. There are state-owned companies and privately-held companies.
Examples of big state-owned companies are Saudi Aramco, Sinopec, China National Petroleum Company, or China State Grid, all of which are among the top 10 biggest companies in the world as measured by annual revenues.
The very biggest company in the world as measured by annual revenues is Walmart Stores Inc., a privately held company owned by heirs of the founder, Sam Walton. It had global revenues of $485 billion in 2014.
Similarly, grain trader Cargill, which trades around a quarter of all the grain produced in the United States, with revenues of $135 billion in 2014, is privately held by the Cargill family.
Koch Industries, founded in 1940 as an oil refining company and since diversified into a range of industries including petroleum, chemicals, minerals, pulp and paper, ranching and finance, among others, is also a privately held company. It had revenues of more than $120 billion in 2014.