The world’s largest companies have done pretty well for their shareholders this year, rapidly climbing out of the COVID-19 crash in March.
With interest rates at historic lows, and even negative in some countries, investors have flocked to park their money in shares.
And all that additional capital has pumped up the value of those stocks.
So much so that, this week, new research revealed the market capitalisation of the 10 largest publicly listed companies have reached 11.93% of the entire world’s gross domestic product.
The study, commissioned by Dutch financial comparison site Bankr, showed the 10 companies were worth US$10.06 trillion as of 13 December.
This compares to a COVID-adjusted global GDP of US$84.27 trillion.
Five US technology companies sit firmly at the top.
“The top 5 companies saw their stock soar in 2020 during the pandemic. The brands were used as a means of navigating the pandemic as most people opted for technology solutions to work remotely, learn, and keep entertained,” read the report.
“Due to the companies’ ability to offer solutions during the pandemic, their stock rallied, indicating a sign of investor confidence amid economic turmoil.”
|Rank||Company||Market capitalisation (USD)|
|1||Apple Inc (NASDAQ: AAPL)||$2.09 trillion|
|2||Microsoft Corporation (NASDAQ: MSFT)||$1.59 trillion|
|3||Amazon.com Inc (NASDAQ: AMZN)||$1.55 trillion|
|4||Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)||$1.22 trillion|
|5||Facebook Inc (NASDAQ: FB)||$0.79 trillion|
|6||Alibaba Group Holding Ltd (NYSE: BABA)||$0.72 trillion|
|7||Tesla Inc (NASDAQ: TSLA)||$0.59 trillion|
|8||Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B)||$0.55 trillion|
|9||Visa Inc (NYSE: V)||$0.49 trillion|
Taiwan Semiconductor Mfg. Co. Ltd (TPE: 2330)
|Source: Bankr; Table created by author|
COVID-19’s impact on valuations
As well as the growth in share prices, the report noted the virus itself had an effect in the massive valuations proportional to the planet’s GDP.
“The health crisis inflicted high and rising human costs worldwide, and the necessary protection measures severely impacted economic activity,” the report stated.
“As a result of the pandemic, the global economy contracted. When comparing growth, the overviewed companies have witnessed rapid growth, unlike the global economy.”
With emerging economies struggling to grow in the last few years, the dominance of massive multinationals predominantly from the US was a concern, according to the study.
“For example, Facebook’s plan to launch its currency has been met with objections. Additionally, some companies continue to invest more in political lobbying,” the Bankr report read.
“It will be interesting to see how this influence will impact their market capitalisation and the global GDP share.”
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Tony Yoo owns shares of Alphabet (A shares) and Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Facebook, Microsoft, Tesla, and Visa and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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