Please ensure Javascript is enabled for purposes of website accessibility

ExxonMobil Doesn't Play Second Fiddle to Apple Anymore -- The Oil Giant is Down to Third String!

By Anders Bylund – Feb 10, 2014 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ExxonMobil's market-cap duel with Apple has come to an abrupt end. Another tech giant has pushed Exxon down to third place.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

ExxonMobil (XOM -0.35%) and Apple (AAPL -1.96%) have been playing their own game of thrones in recent years. One of these stocks holds the largest market cap on the stock market, followed by the other, since 2011. It's an epic battle to stir the blood and quicken the pulse -- if you keep an eye on such market metrics, at least.

XOM Market Cap Chart

XOM Market Cap data by YCharts.

But things have changed. Coming up from behind, Google (GOOGL -1.02%) has claimed the second place in the market-cap race, pushing Exxon down to the third spot. Exxon remains the largest market cap on the Dow Jones Industrial Average (^DJI 0.45%) because neither Apple nor Google belong to that exclusive index, but now it's only the third most valuable business on the stock market.

XOM Market Cap Chart

XOM Market Cap data by YCharts.

So what's behind this shift at the top? A couple of things.

Google shares went through some hard times in recent years, trading behind the Dow between 2010 and 2013. Not for a lack of business performance, mind you, but investors kept compressing Google's valuation multiples for several reasons.

GOOG PE Ratio (TTM) Chart

GOOG P/E Ratio (TTM) data by YCharts.

For one, Apple always played the more profitable hand in the mobile wars, leaving Google and its Android platform the lion's share of sales but only table scraps of profit. This is how Apple claimed the very top spot in the market cap marathon, and a key reason why Google didn't join the cap leaders.

Moreover, Google skeptics take a dim view of the company's business model in general. The barriers to entry in online search and advertising seem vanishingly low; surely, Google must be ripe for replacement by the next hungry upstart with a better idea?

But as it turns out (and don't call me Shirley), Google isn't exactly resting on its laurels. Big G's own research keeps the eponymous search engine relevant despite the best efforts of technology leaders and upstarts alike to topple the apple cart. Google's advertising machine has no equal so far.

And when serious threats do materialize, Google isn't afraid to haul out the wallet and buy its way to online dominance. YouTube is a classic case study of this strategy, and the $3.2 billion Nest Labs buyout shows that Google remains committed to protecting its future by any means necessary.

In 2013, Google investors started giving the stock some credit for this long-term vision, and the rest is market history. Google shares have gained 52% over the last 12 months while the Dow only climbed 13% higher.

Of course, Exxon has underperformed the Dow recently, with only breakeven returns over the last year. Oil prices have slowed down their once-unstoppable skyward climb, and the developed world is starting to get comfortable with the idea of using less black gold.


Source: Nasdaq.com.

Fellow Fool Travis Hoium calls Exxon one of the worst Dow stocks for 2014, suggesting that the oil giant may not be involved in that old race with Apple for the foreseeable future.

With Google on an undeniable upward trajectory and Exxon slowly fading, it's time to get used to technology stocks ruling the market again. And neither one of the top two stocks is likely to join the Dow anytime soon.

Anders Bylund owns shares of Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.

We Fools may not 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,347.03 (0.45%) $152.97
Apple Stock Quote
Apple
AAPL
$148.11 (-1.96%) $-2.96
Alphabet (A shares) Stock Quote
Alphabet (A shares)
GOOGL
$97.46 (-1.02%) $-1.00
ExxonMobil Stock Quote
ExxonMobil
XOM
$113.21 (-0.35%) $0.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
360%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.