The Best of the Big Boys

Jon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Recently I have personally been interested in finding a couple of large market cap companies to better anchor my portfolio.  Looking at many large companies got me thinking, "of the five largest publicly traded companies, which offers the best investing opportunity?"  When the question popped in my head, I sat down and tried to think of what the top five even were.  I only got two out of the five correct from memory.  In case you don't have it memorized either, here they are:

  1. Apple (NASDAQ: AAPL)
  2. ExxonMobil Corp (NYSE: XOM)
  3. PetroChina Company Limited (NYSE: PTR)
  4. Wal-Mart Stores (NYSE: WMT)
  5. Microsoft (NASDAQ: MSFT)

Ok, so these are the companies we'll be taking a closer look at in this article.  We will be looking to answer the question: "which offers the best investing opportunity for buy and hold investors?"

The Fundamentals

What are the fundamentals exactly?  What is considered important information is different for every investor. In the chart below, I've picked out five of the more important pieces of financial information for me.

<table> <tbody> <tr> <td><strong>Company</strong></td> <td><strong>P/E</strong></td> <td><strong>Forward P/E</strong></td> <td><strong>Dividend/Yield</strong></td> <td><strong>Profit Margin</strong></td> <td><strong>Net Income</strong></td> </tr> <tr> <td>Apple</td> <td>12.94</td> <td>9.85</td> <td>$10.60/1.9%</td> <td>26.67%</td> <td>$41.73 Billion</td> </tr> <tr> <td>ExxonMobil</td> <td>9.42</td> <td>11.25</td> <td>$2.28/2.6%</td> <td>10.4%</td> <td>$44.33 Billion</td> </tr> <tr> <td>PetroChina</td> <td>12.91</td> <td>9.26</td> <td>$4.29/3.3%</td> <td>5.57%</td> <td>$18.58 Billion</td> </tr> <tr> <td>Wal-Mart</td> <td>14.44</td> <td>13.05</td> <td>$1.59/2.3%</td> <td>3.57%</td> <td>$16.59 Billion</td> </tr> <tr> <td>Micosoft</td> <td>14.97</td> <td>8.55</td> <td>$0.92/3.4%</td> <td>21.71%</td> <td>$15.71 Billion</td> </tr> </tbody> </table>

With all those numbers, it can be hard to analyze what is going on.  So, I've decided to do the following.  In each column, we'll give a number 1-5.  One being the best, and five being the worst.  Then we can add these numbers up to see how the companies do in relation to each other.


  • Apple 14
  • ExxonMobil 12
  • PetroChina 13
  • Wal-Mart 22
  • Microsoft 14

Based on these five statistics, ExxonMobil emerges as the most valuable investment.  But PetroChina, Apple, and Microsoft are all close on their heels.  Really the only one that stands out, in a bad way, is Wal-Mart.  They ranked last, or next to last in each of the five categories.  

Up or Down?

The statistics that we looked at above represent where these companies are at in this particular moment in history.  They are frozen in time.  Equally important in investing decisions is understanding company trends.  In which direction is the company headed?

<img src="" />

AAPL Revenue TTM data by YCharts

Over the last 3.5 years, Apple and PetroChina have blasted off like rocket ships.  Revenues have been going up, up, up...This is very unusual for large companies.  When you see that Apple has increase revenue 258% and PetroChina 144%, it starts to make the other three companies look pathetic.  But really, the revenue growth for the others seems to be more in line with what could be considered normal.  They only look pathetic when compared to the historic growth Apple has seen.

But we shouldn't just look at revenues.  After all, companies can, and often do, increase revenues while net income suffers.

<img src="" />

AAPL Net Income TTM data by YCharts

A quick glance will show you that is pretty much the case with PetroChina.  They've increased revenue 144%, but net income has only increased 6%.  Microsoft also saw net income increase at a slower rate than revenue. Exxon looks fine.  But Apple?  Oh Apple is up an incredible 413%.  

As we draw conclusions from these two charts, we would have to say all five are going up.  But who's going up the fastest?  Without a doubt, this is Apple.  Exxon gets number two.  I think if we had to pick a loser when it comes to growth, we should pick Microsoft.  They are heading up, but the slowest of the five.

At What Cost?

We've looked at some fundamentals.  We looked at growth.  Is there anything else we need to figure out which of the five is the best value opportunity?  I think one more thing worthy of our time is considering these companies' long term debt.

<img src="" />

AAPL Long Term Debt data by YCharts

Over the last year, PetroChina's debt has skyrocketed out of control.  In fact, it's more than doubled.  Doubling might not be the end of the world if you have like twenty dollars of debt.  But when you have $20 Billion and you double it...well that's a problem for me.  

Wal-Mart's debt is somewhat steady, but extremely high.  When I'm thinking long term, I don't like companies to be this saddled with debt.

Exxon and Microsoft's debt burdens are reasonable.  I don't care who you are, $8 Billion is a lot of money, but at least their debts seem to be under control.  Microsoft's has been gradually increasing.  I tip my hat to Exxon who has actually been able to lower their debt the last couple years.

But come on...who are we kidding?  Do you see that big fat zero at the bottom of the chart?  That belongs to none other than Apple.  That's right folks, zero debt.  When you try to give a score to a debt load, zero debt always get a perfect score.  And as my former employer used to say "perfect is close enough."


Which of these five companies offers the best investing opportunity for buy and hold investors?  We ruled out Wal-Mart from the fundamental section, and debt.  PetroChina is out on debt.  Microsoft was eliminated on growth.  Really it comes down to two candidates: ExxonMobil and Apple.

Exxon is a great runner up in my opinion.  This is a solid company that makes a ton of money, and will continue to do so for the foreseeable future.  Their dividend is good.  There's a lot to like here.

But the winner in my book is Apple.  You can't argue with their growth.  You can't deny their income.  They don't have any debt to worry about.  In my opinion, the world's most valuable company is also our value investing winner.

thequast has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Microsoft, and ExxonMobil. Motley Fool newsletter services recommend Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus