Bargains Among the World's Largest Companies

This article has been adapted from our sister site across the pond, Fool U.K..

Each year, the Financial Times produces a report covering the world's 500 largest listed companies. The latest FT World 500 report was published last Saturday -- and it makes for very interesting reading.

The report reveals that the value of the world's 500 largest firms shot up from $15.6 trillion at the end of 2008 to $23.5 trillion at the end of 2009. In other words, the worth of these big players climbed by more than half (50.5%) in 12 months.

The fab five
Today I'm going to pick out a few highlights for you. First, based on market capitalization at the end of 2009, here are the world's five largest companies:

Company

Country

Sector

Market
Cap
($billion)

P/E
Ratio

Dividend
Yield
(%)

PetroChina (NYSE: PTR  )

China

Oil & gas producers

329

14.6

3.4

ExxonMobil (NYSE: XOM  )

U.S.

Oil & gas producers

316

16.8

2.5

Microsoft (Nasdaq: MSFT  )

U.S.

Software &
computer services

257

18.1

1.8

Industrial & Commercial
Bank of China

China

Banks

246

15.2

2.6

Apple (Nasdaq: AAPL  )

U.S.

Technology hardware
& equipment

213

37.4

N/A

Source: Financial Times. All figures as of 3/31/10.

For the first time ever, a Chinese company is the biggest listed business in the world. It's hardly surprising, given China's incredible growth over the past decade (a period during which Chinese gross domestic product per person roughly quadrupled).

As of this survey, Microsoft was the world's biggest tech firm, beating Apple into third place. However, since the start of 2010, Microsoft's share price has dropped by around 15%, whereas Apple's has soared by 25%. Thus, the maker of iconic devices such as the Apple Mac, iPod, iPhone, and iPad (which sold more than 2 million units in just 60 days) is now the world's largest technology company.

For the record, none of these big five immediately strikes me as a bargain. They all have price-to-earnings ratios (P/Es) in the teens, combined with low or no dividends. Indeed, Apple has never paid a dividend. That said, you don't get to be a global giant by making mistakes, so it may be worth paying over the odds for world-leading businesses.

The U.K.'s 12 titans
Now let's turn to the U.K.'s entries in the Global 500. Here are our top 12 Goliaths:

Global Rank

Company

Sector

Market Cap
($billion)

P/E
Ratio

Dividend
Yield
(%)

6

BHP Billiton (NYSE: BHP  )

Mining

210

34.8

2.3

18

BP (NYSE: BP  )

Oil & gas producers

178

10.3

6.0

19

Royal Dutch
Shell (NYSE: RDS-A  )

Oil & gas producers

177

13.8

6.0

20

HSBC (NYSE: HBC  )

Banks

177

28.9

3.5

35

Rio Tinto (NYSE: RTP  )

Mining

134

20.9

0.8

42

Vodafone (NYSE: VOD  )

Mobile telecoms

121

28.9

4.8

50

GlaxoSmithKline
(NYSE: GSK  )

Pharmaceuticals
& biotechnology

100

10.9

5.2

61

Unilever (NYSE: UL  )

Food producers

84

17.4

2.2

79

British American
Tobacco (NYSE: BTI  )

Tobacco

69

15.6

4.7

85

Barclays (NYSE: BCS  )

Banks

66

3.9

0.7

88

AstraZeneca
(NYSE: AZN  )

Pharmaceuticals
& biotechnology

65

8.4

5.1

90

Lloyds Banking
Group (NYSE: LYG  )

Banks

64

7.9

N/A

Source: Financial Times. All figures as of 3/31/10.

These 12 are the only U.K. entrants in the top 100 of the FT World 500. (Note that miners BHP Billiton and Rio Tinto have dual Australia-U.K. listings, and Unilever has a dual listing in the U.K. and The Netherlands).

The above table comprises two miners, two oil and gas producers, three banks, two pharma firms, a telecoms business, a consumer-products manufacturer, and a tobacco company. All of these will be household names to most investors, so I won't bother with any background detail.

The crucial thing to note here is that the market caps, price-to-earnings ratios, and dividend yields shown above apply as of March 31, 2010. In the past two months, share prices may have moved steeply up or down. Hence, you should delve deeper into the above businesses in order to discover their current financial fundamentals before going any further.

Four cheap megacaps
I have spotted four of my personal value favorites in the above "titanic 12."

Despite its horrendous problems with the Deepwater Horizon oil spill, BP could offer standout value over the long term. On the less risky side, Vodafone offers a below-average P/E and a market-beating dividend yield, plus exposure to fast-growing developing countries.

Similarly, I'm a fan of HSBC because it is one of the world's biggest banks, yet offers exposure to fast-growing Asia-Pacific markets. Lastly, I favor GlaxoSmithKline because it showed its strength by boosting its sales and dividend during the credit crunch and worldwide recession.

Finally, to repeat my earlier warning, the above figures are a couple of months old. Therefore, you should DYOR -- do your own research -- before investing in any of these global leaders.

More from Fool U.K.'s Cliff D'Arcy:

This article was written by Cliff D'Arcy, who owns shares of GlaxoSmithKline. Microsoft is a Motley Fool Inside Value recommendation. Apple is a Motley Fool Stock Advisor selection. Unilever is a Motley Fool Global Gains pick. Unilever is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of GlaxoSmithKline. Read about the Fool's disclosure policy.


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