In August 2018, Apple became the first company to reach a market capitalization of more than $1 trillion. The tech giant now has a market cap of approximately $2.76 trillion and still stands as the world's most valuable business, but it's not the only company with a valuation that's marched past the trillion-dollar threshold. Saudi Aramco, Microsoft, Alphabet, Amazon, and Nvidia are now also proud members of the trillion-dollar club.
If you're wondering which companies will be next to reach a market capitalization of $1 trillion, read on to see why Berkshire Hathaway (BRK.A -0.07%) (BRK.B -0.24%) and Meta Platforms (META -2.96%) stand out as strong contenders.
Bet on Buffett joining the trillion-dollar club
Keith Noonan (Berkshire Hathaway): With a market capitalization of roughly $800 billion, Berkshire Hathaway ranks as the world's eighth-largest company. The investment conglomerate, which is led by CEO Warren Buffett, has an excellent chance of crossing the $1 trillion mark within the next five years.
Backing out the changes in the paper value of its stock positions, which are written down as either profits or losses on the company's earnings reports, operating income rose roughly 7% year over year to hit $10 billion. The value of the company's stock portfolio has also risen substantially over the last year. Thanks in large part to bullish momentum for stocks and solid performance for its range of fully and partially owned subsidiary businesses across the insurance, transportation, and energy industries, Berkshire's market capitalization has climbed roughly 27% over the last 12 months.
Share buybacks have also helped the company to increase its earnings per share and boosted the value of its stock. As the investment conglomerate repurchases and retires shares, its total number of shares outstanding decreases. Profits are split across a smaller number of shares, which makes the stock more appealing for investors and helps to boost share prices.
If Berkshire were to match the S&P 500 index's average annual return of 10% over the next three years, it would arrive at a valuation of roughly $1.06 trillion. Of course, it has to be said that Warren Buffett, co-chairman Charlie Munger, and the analyst teams at the holding company have a stellar track record when it comes to beating the benchmark index.
BRK.A Total Return Level data by YCharts
Berkshire's market-beating performance generally becomes even more impressive when the comparison stretches across longer periods of time. Over the last 30 years, Buffett's company has delivered a dividend-adjusted total return of roughly 3,220% -- trouncing the S&P 500 index's total return of roughly 1,620% across the stretch.
Meta Platforms' journey to $1 trillion may not be easy
Parkev Tatevosian (Meta Platforms): At a market capitalization of $776 billion, It is a matter of when, not if, Meta Platforms will surpass the $1 trillion milestone. The social media giant turned metaverse pioneer has roughly 2 billion daily active users across its apps, including Facebook, Instagram, and WhatsApp. While it offers many of its services for free to users, Meta still managed to generate $117 billion in revenue in 2022.
That annual revenue figure is a significant increase from the $12.5 billion Meta earned in sales in 2014. Meta makes much of its money from the advertisements that appear on its various platforms. It makes so much because its platforms are used daily by several billion users and brands find it difficult to achieve that broad of a reach from other ad-based outlets. Given the continued revenue growth, it is reasonable to assume advertisers feel they get an excellent return on their ad placements.
META PE Ratio (Forward 1y) data by YCharts
The surge in revenue has led to gains in profitability, as Meta's operating income jumped from $5 billion to $29 billion from 2014 to 2022. Meta's valuation is growing because investors are interested in the increased profits and/or the expansion Meta continues to demonstrate. At a forward price-to-earnings ratio of roughly 18, Meta's valuation multiple has room to keep expanding. The rise to $1 trillion in market capitalization is likely to come from a combination of the continued growth in revenue and profits.
Berkshire and Meta are smart long-term buys
With the next sustained bull market, Berkshire and Meta have a very good chance of joining the trillion-dollar club. But both companies will also likely reach valuations far beyond the $1 trillion mark. For long-term investors, building positions in each of these stocks could be a great way to position a portfolio for market-beating gains while also minimizing potential downside risk.
