1 Reason Why Google -- Not Apple or ExxonMobil -- Will Be the Most Valuable Company by 2017

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Apple (NASDAQ: AAPL  ) is my largest personal stock holding, both by percentage of portfolio and dollars invested. I'm a fan of the company, and I agree with CEO Tim Cook's apparent hesitation to either make a splashy acquisition or return a large amount of Apple's growing mountain of cash to shareholders.  

I love the company's discipline and insistence on developing innovative and excellent products, as opposed to simply getting in on a market or a trend with a lackluster offering. This extension of the late Steve Jobs' mentality about only doing something if it can be done better than someone else, has helped Apple remain a fantastic investment. 

Similarly, ExxonMobil  (NYSE: XOM  ) sits atop the "Big Oil" heap, largely a product of incredible discipline to the specific goal of generating returns. When measured using Return on Capital Employed, or ROCE, a common measure of energy companies, ExxonMobil is head-and-shoulders above its peers. Increasing demand for cheap energy as the world's population -- especially the global middle class -- grows will keep ExxonMobil one of the world's most valuable companies. 

But, looking into the future, neither of these two companies is as well-positioned for growth as Google  (NASDAQ: GOOGL  ) . The biggest reason? Google is plugged into the most valuable commodity of all -- more valuable than oil or the cache of an elite brand -- information. Google is willing to experiment on everything from the mundane to the outlandish, just to continue giving us that information for free. It's already cutting the distance down:

AAPL Market Cap Chart

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Don't believe me? Let's take a closer look.

Investor return isn't always about company growth

Even with the $31 billion in stock to buy XTO Energy, ExxonMobil's share count has declined over the past decade. Source: Wikimedia Commons

For investors, the return from an investment in ExxonMobil will largely be a product of two things: share buybacks and dividend growth. A decade ago, the company had more than 6.5 billion shares outstanding. Today, that number is less than 4.4 billion, a 31% reduction. For investors who have held their shares, they now own almost one-third more of ExxonMobil than before, without having had to buy another share. 

The company has also consistently raised its quarterly dividend, from $0.25 per share in 2002 to $0.63 per share today, which equates to a 2.5% yield if you bought shares today. But, if you had purchased shares in 2002 for around $45, you'd be getting a nearly 6% annual return on your initial investment, just from the dividend. 

While incredibly rewarding for shareholders, neither of these characteristics make ExxonMobil a bigger or more valuable company. However, increasing strife in the Middle East, as well as record discoveries of offshore and shale oil and gas, all point toward stagnant -- or even lower -- energy prices over the next several years. That scenario could have a profound impact on ExxonMobil's value. 

How can Apple change the world (again)?

iPhone at MacWorld in 2007. Source: Flickr contributor blakeburris

Apple legitimately started the mobile revolution. The way we engage our computers has been forever altered by the iPhone, iPad, and previously, the iPod. Today, the traditional computer industry is cracking at the seams as demand falls and fixed costs for manufacturers, like Hewlett-Packard and Dell, weigh on the giants in this dying industry.

Even the growing smartphone and tablet businesses are generating less income for Apple today, as competitors like Google and Samsung take more market share. While the recent deal with China Mobile clearly offers huge upside, there's little reason to expect Apple to launch another category-killing or -creating product in the near future. Frankly, it would be unwise to bet on any company being able to do -- just once -- what Apple has managed to do several times over the past 15 years. Expecting that Cook and Co. will be more like ExxonMobil, buying back shares at reasonable rates while steadily increasing the dividend, is a more plausible thesis. 

Google is different

Google self-driving car. Source: Steve Jurvetson

Google's willingness to experiment with ideas like Glass and self-driving cars, together with the gall to spend $3.2 billion on a company that makes thermostats and smoke detectors, points at a common theme within the company: capture as much data about human behavior as possible. Every aspect of what Google does has this goal tied to it. Self-driving cars not only give Google valuable information about where (and when) you go, but also gives you more time to interact with Google's products like Gmail and YouTube, similar to how Android and the iPhone have freed your computer from the shackles of the desktop. 

Look to the future
It's wild speculation that Google will indeed be the most valuable company within the next three years. However, the vast seas of data that Google can access are just beginning to be tapped in any meaningful way. Barring a massive shift in consumers' tacit acceptance of this "new normal" around data sharing, the company's efforts to further tap into consumer behavior will only lead to more revenue. This is especially true as Google and its partners gain a better understanding of how this data can be used to influence consumers. Simply put, Google's path to continued growth looks clearer than Apple's or ExxonMobil's. 

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Read/Post Comments (6) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 23, 2014, at 12:03 AM, peto3 wrote:

    "a common theme within the company: capture as much data about human behavior as possible. Every aspect of what Google does has this goal tied to it."

    Yeah, right - and sell it to advertisers so they can dun us all from cradle to grave with a never ending stream of crass and annoying ads. What is it you don't understand, Jason? For Google, all we are are products and all they want to do is sell us to the highest bidder. You can count me out ...

  • Report this Comment On January 23, 2014, at 8:30 AM, JarJarThomas wrote:

    The point i see is google is the biggest risk to invest right now.

    Look at the nsa scandal,

    Look at how google gets bad talked in europe where privacy is a much bigger concern.

    Look at the reactions after buying nest.

    Look at Cyanogen Mod for Android

    Look at private android alternatives

    Look at COS

    Google needs informations. They can get informations only if people are willing to give them to google. And that is rapidly changing.

    Ask joe from the street, even he starts now realizing that with all the data google has about him, something bad could happen. And if joe from the street starts requesting the idea of giving his data to google ... they will loose as fast as possible.

    Second point why your idea is wrong,

    google owns it's money through advertising.

    And even with the current valuation of google, google is far more worth than ad$ are spent.

    So no, google is a bubble right now.

  • Report this Comment On January 23, 2014, at 8:42 AM, Mathman6577 wrote:

    Good article. It might be sooner than 2017 when Google overtakes Apple but there might be room at the top for two or three (add Amazon to the mix too) big companies.

  • Report this Comment On January 23, 2014, at 12:25 PM, wilsontt88 wrote:

    I highly disagree with some poster's opinion that Google is a bubble. From the very beginning of time, information is = power, and knowing how to use the information = wealth. Now Google has both, and even the definition of 'what is internet' itself = Google; thanks to their massive (millions of) servers which everyone on earth connects to from time-to-time. You might even be connected to one of their servers now.

    Hence I do agree with the article that Google will be one of the most valuable company in the future. Logically, which company would you invest in? A marketing-fuelled company which overcharged many of its 'milk-it-for-all-its-worth' product, or an engineer-filled company which invents breakthrough technologies for the future?

    Personally I'd trust tens of thousands of over-qualified engineers in Google, over the same amount of marketing staffs you'd find in other corporations. So you do the math :)

  • Report this Comment On January 23, 2014, at 12:55 PM, jol wrote:

    With no facts the article reaches the point of the headlines.

    Same as people findout that IOS is loosing the buttle against Android and calling it victory of Google without mentioning that nobody can purchase IOS operating system from Apple.

    Also here,without any knowledge on what Apple is spending Billions on R&D the winner is the one that purchase companies and tries everything.

    Apple for your information is dealing in health and education .Their research is focused on the most important things in life.Not cars or glasses.

  • Report this Comment On January 23, 2014, at 2:54 PM, ChrisS3 wrote:

    Those who complain about Google's revolutionary and groundbreaking deployment of user data mining act as if no other company mines and uses data. Hell, CBS knows what demographic watches Big Bang Theory. They know what your average education is, what your income is, how many kids you have and they even know what time you tune in and turn off the TV and go to bed. AND THEY USE THAT DATA TO SELL TARGETED AD SPACE TO ADVERTISERS!

    Get over yourselves. Your lives are not that interesting and you're not that important.

    Besides, if Apple had brain enough to build it's business on the PROVEN rock of advertising (rather than overcharging for commodity phones and MP3 players), you can bet your life they would! Except the Google brain trust is bigger than the Apple brain trust. Buy an Apple product and Apple makes money ONCE on that product. Buy an LG, Samsung, Sony, HTC, Huawei, Oppo, Acer, HP et al, and Google mines data and revenue for the LIFETIME of that product.

    Apple is a burning platform. We all know it.

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Jason Hall

Born and raised in the Deep South of Georgia, Jason now calls Southern California home. A Fool since 2006, he began contributing to in 2012. Trying to invest better? Like learning about companies with great (or really bad) stories? Jason can usually be found there, cutting through the noise and trying to get to the heart of the story.

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