Apple Still Wears the Market Crown. It Can Easily Slip.
04 Septembre 2020 - 5:30PM
Dow Jones News
By Jason Zweig
On Aug. 31, Exxon Mobil Corp. was booted from the Dow Jones
Industrial Average. That should serve as a warning about the
technology stocks that, at least until Thursday's shocking 5%
decline, have been the market's darlings.
As recently as 2011, Exxon had the biggest market capitalization
of any company in the world. It had been the longest-tenured
company in the Dow, having entered the index in October 1928.
What's more, as long ago as 1912 Exxon (then known as Standard
Oil Co. of New Jersey) had been the world's second-largest stock,
surpassed in market value only by U.S. Steel. If such a durable
titan can fall away, so can the tech stocks that so many investors
have come to regard as invincible.
Exxon had been one of the five biggest U.S. stocks by market
value in every decade from the 1930s to the 2010s, according to
Dimensional Fund Advisors, an investment-management firm based in
Austin, Texas. Now it isn't even among the top 30.
It is hard to stay on top, but it's even harder to get there. Of
the 24,979 companies (including real-estate investment trusts) that
issued common stock between December 1925 and July 2020, only 11
have ever ranked number one by market value. That's according to
the Center for Research in Security Prices LLC, a data and index
provider affiliated with the University of Chicago Booth School of
Business.
AT&T Corp. was the largest stock in the U.S. 43% of the time
over that nearly 95-year period. In the early 1930s, it alone
accounted for one-eighth of the value of the entire U.S. stock
market. As recently as the 1960s it was still one-twelfth of total
U.S. market value all by itself.
International Business Machines Corp. was no. 1 in market value
among all stocks 20% of the time, and General Electric Co. and
Exxon each ranked number one on 10% of all trading days. In decades
past, General Motors Corp. -- nowadays no longer even among the 150
largest stocks -- was often king, ranking number one more than 6%
of the time.
Then there were the companies whose reign at the top lasted only
a few days. Altria Group Inc., formerly Philip Morris Cos. Inc.,
was the biggest stock in the U.S. for 34 days in 1991 and 1992;
E.I. DuPont de Nemours & Co., for 11 days in 1955; and Walmart
Inc. for a grand total of three days in 1992.
Some of Exxon's shrinkage is its own doing. Years ago, the
company embarked on one of the biggest share-repurchase programs in
history. Exxon bought back 2.3 billion shares -- more than one
third of its total common stock -- from 2004 through 2020. The
company spent $231.4 billion on these buybacks, according to
S&P Dow Jones Indices analyst Howard Silverblatt.
To put that in perspective, Exxon's cumulative spending on
buybacks over that period exceeds the current market value of Bank
of America Corp., the 27th-largest company in the S&P 500.
Of course, investors who participated in Exxon's buybacks had to
reallocate the cash they received when they sold their shares back
to the company. Much of the proceeds from selling Exxon surely went
into buying stocks like Apple Inc., Microsoft Corp. and Amazon.com
Inc.
Those are the very companies that have jostled back and forth
for the position of biggest stock in the U.S. market. Exxon not
only shrank itself, but made other stocks bigger in the process.
Even after Thursday's tumble, Apple still was the largest U.S.
stock, with a market value of $2.29 trillion; Exxon's shares had a
total value of $167 billion.
How long can companies like Apple, Microsoft and Amazon stay on
top? The slow decline of Exxon and the shocking drop in leading
tech stocks show that corporate lifecycles are, in fact,
circular.
Medieval artists liked to illustrate the circle of life with a
wheel of fortune. Often the wheel, spun by the blind and capricious
goddess of fortune, features a royal figure trying to cling to it.
As the wheel carries him upward, he can be seen calling out
"Regnabo" (in Latin, "I shall be king"). At the top of the wheel's
rotation, he declares "Regno" (I am king). Then, as the wheel spins
and he begins to fall, he says "Regnavi" (I have been king).
Finally, falling off the bottom of the wheel, he cries "Sum sine
regno" (I have no kingdom).
Many investors seemed to believe, at least until this week, that
today's giant technology companies will dominate the U.S. stock
market for decades to come. And those investors could still be
proven right. But, if they are, that proof will defy not just
nearly a century of market history but the wisdom of the ages,
which teaches that all things -- including wealth and power -- are
cyclical.
Write to Jason Zweig at intelligentinvestor@wsj.com
(END) Dow Jones Newswires
September 04, 2020 11:15 ET (15:15 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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