Apple crossed USD 700 billion in market capitalization on the 25th of November 2014. The company is the most valuable company in the world and has far outpaced Exxon Mobile, which was at one point of time the highest market capitalization company in the world. Exxon’s market cap is USD 400 billion and is down over the last few years.
Apple’s market cap is well above that of Microsoft and Google, which are at USD 391 billion and USD 370 billion respectively. Apple’s market cap has grown by 25x over the last ten years.
Why should Apple figure in your thought process on your equity portfolio even if you are not investing in the global market? The reason is that the fact that market is giving the most valuable company status to Apple is telling the world a strong story. The story is that an innovative, design based company that is still able to lure customers with premium products in what is seen as a largely commoditized market for smart phones and tablets. iPhone 6 and 6 plus has been a record breaker for Apple and the market is eagerly awaiting the release of its iWatch.
Apple has not allowed its OS to be used in non Apple devices, unlike Google’s Android that runs in most of the mobile phones in the world right now. Critics say that this strategy of Apple is not right but the market is as usual giving thumbs down to the critics.
Apple is definitely going to find it tough to emulate even a small percentage of its phenomenal growth over the last ten year years, but it can definitely stay at its hallowed position for a while to come, despite the critics.
Now, coming back to the question, why should Apple influence your equity portfolio? The answer is that it tells you where the market is headed going forward. Hence for example if you are invested in commodity stocks or even commoditized businesses that are facing huge competitive pressures and are finding it difficult to hold on to margins, your portfolio is not going to perform.
On the other hand, if you are invested in stocks that have proprietary technology or are growing a customer base much faster than any other businesses or in extremely strong brands that still have relevance in this fast changing world, you would be invested for the future.
You could say that India or any other country is different and drivers of growth are different but that is not true in this globalized world. Take for example ecommerce, where Amazon clones like Flipkart have seen valuations grow multifold in a short span of time purely on the back of its increasing user base, which is coming at the cost of Brick and Mortar retailers. Indian’s are wholeheartedly embracing B2C ecommerce.
China on the other hand has embraced B2B ecommerce with Alibaba becoming one of the most valuable companies in the world with a market cap of USD 283 billion.
The underlying trend is clear, consumer preference is changing or being changed by companies like Apple. Make sure that your portfolio reflects the same.