Should This Tech Giant Really Want to Become the Biggest Stock in the Market?

A new stock has just taken the No. 2 spot, but overtaking Apple might be a bad idea. Here's why.

Feb 9, 2014 at 11:31AM

The S&P 500 (^GSPC) includes 500 of the largest stocks in the U.S. market, but there's a huge disparity between the smallest stocks in the index and the largest ones. Recently, online-search giant Google (GOOG) has seen its share-price soar, and the stock's market capitalization briefly overtook that of oil behemoth ExxonMobil (NYSE:XOM) during Friday's trading before falling back somewhat. Yet even though investors would likely applaud the roughly 17% profit they could earn if Google continued growing enough to overtake top-ranked Apple (NASDAQ:AAPL), the fact is that reigns atop the S&P throne have historically given way to some dramatic falls. Could Google be next?


The long list of has-been big stocks
The problem that companies have with getting big is that investors expect them to stay big. But as it turns out, that's surprisingly difficult to do. In the history of the stock market, six companies have managed to hit the half-trillion-dollar mark in market capitalization, with three of them being tech stocks.

Even though Apple remains in the top spot, its market cap is well off its highs. In late 2012, the company was worth about $650 billion, but even after an impressive bounce from last year's lows, its market cap is roughly 30% below that level.

That might sound like a substantial drop, but it's nothing compared to other past tech high-flyers. In 2000, Intel (NASDAQ:INTC) briefly topped $500 billion in market cap, as its almost-unchallenged dominance of the PC industry pointed to a rich future. Now, it stands more than three-quarters below that level, as the rise of the mobile revolution has threatened to slaughter its cash cow and leave it trying to sell obsolete technology. Microsoft (MSFT) has lost about half its market cap since its peak value of $613 billion in late 1999.

Cisco Systems (NASDAQ:CSCO) has had an even bigger fall from grace. Having been the biggest company in the market briefly in sporting a $550 billion market cap 14 years ago, the networking giant promised to take full advantage of the Internet's rise. Yet the tech bust left the stock particularly hard hit, and now, a nearly 80% drop in market cap reflects concerns that smaller competitors have already dislodged Cisco from the leadership role in the networking industry.

Yet technology stocks aren't the only ones to suffer from leadership anxiety. General Electric (NYSE:GE) took over the top-stock role in late 2000, almost hitting $600 billion in market cap. One financial crisis later, GE sports a market cap almost 60% lower, despite having rebounded sharply in the aftermath of the market meltdown of 2008 and early 2009. Even Exxon is down by about a quarter from its highs, as the oil giant hasn't been able to replicate the success that sent its stock soaring when oil approached $150 per barrel briefly in late 2007.

The No. 1 curse?
Obviously, it's premature to talk about Google being the No. 1 stock in the market, since it still has substantial ground to gain on Apple before dethroning the iPhone maker. So far, the online-search company seems to be firing on all cylinders, with recent decisions divesting itself of its Motorola Mobility division, agreeing to a cross-licensing deal with Samsung, and buying some smaller companies to expand its reach in artificial intelligence.

In the end, the only limit to a company's value is its ability to grow profits. Although natural impediments like antitrust law tend to stop many companies from growing beyond a certain point, Google won't automatically be doomed to the same fate as its predecessors even if it does eventually leapfrog Apple to take over the top spot in the market.

Don't just think big
There's a huge difference between a big stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple, Cisco Systems, Google, and Intel and owns shares of Apple, General Electric, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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