Apple (AAPL +2.65%) 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 (XOM 3.65%) 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 (GOOG +1.71%). 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 data by YCharts
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.
