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 AUG 31, 2016

(2 minute read)


We believe in the free market. A consumer-driven democracy, where the people vote with their wallets. How can billions of buyers be wrong about the most valuable companies and products in the marketplace?

Marketplaces are constantly in a state of change. The below chart uses market capitalization to illustrate the change in most valued (publicly traded) companies over the course of fifteen years. By definition, the largest companies by market cap are the most valued by investors. So, what is the largest difference in valued companies from 2001 to today? Can you spot it? 

 

 

How about now?

 

 

Since 2001, oil barons have seen a decline while Silicon Valley tech companies have gained the title as most valuable. In 2016 the top 5 most valued companies all call Silicon Valley home. Currently in a cycle when oil prices are moderate, energy companies are not as valued. Brick-and-mortar companies are being replaced with e-commerce firms. Case and point: Walmart, which had a tight foothold in the market selling seemingly everything from A to Z, could have been and should have been Amazon. Another example recently unfolding: LensCrafters, a market leader in eyewear, could have been and should have been Warby Parker. Selling online is eclipsing selling at stores.

A huge part of what these companies have over brick-and-mortar is scale. In order to grow their audience and consumers, Walmart had to build more stores, alter supply chains, and hire hundreds of employees per store. On the other hand, Amazon uses e-commerce and can expand without the risk and issues that companies with physical locations deal with.

In the past few years, the market has placed a high value on energy companies, particularly in the oil business. Today, our market values technology. In another 15 years, what will the top 5 companies be? Time will tell and the market will dictate.