Home > Two Decades of Changes at Top Five Corporate America

Two Decades of Changes at Top Five Corporate America

October 9, 2020 By Mircea Vasiu

One of the most incredible stock market comebacks in history happened in 2020. As the world’s economies plunged into the unknown, the U.S. stock market, and soon after, other markets, climbed from the hole and outperformed in a spectacular manner. 

In some cases, like the S&P500 or the  Nasdaq 100 indices, the stock market made new all-time highs. In some other cases, like the Dow Jones, the market sits close to all-time highs. One thing is for sure – as we head into the U.S. elections, the likelihood is that the market will simply consolidate around these levels or climb even more until the post-elections result is known.

2020 is the technology year. Tech companies like Amazon or Apple dominated the news during the pandemic and easily posted earnings bigger than the market expected.

An interesting comparison between the top five companies today and two decades ago reveals how the big tech revolution started.

One name is responsible for it. Microsoft.

How the Tech Conquered the World

Twenty years ago, the top five companies in corporate America came from different industries. Pfizer (a pharmaceutical company)  just replaced Intel in the top five judging by market capitalization. Cisco, the network hardware company, was a different company than Cisco today. Yet, its market capitalization of $388 billion made it the second-largest company in the United States at that time.

Then there’s General Electric. Jack Welch built one of the most envied corporate cultures in the world – and investors rewarded it by buying its shares.

At that time, Microsoft was already a well-established company. Remember that those were the times of people still getting familiar with the Internet, sending an email, and personal computers outside America did not sell as they do today. Yet, Microsoft managed to reach the top five in terms of market capitalization.

Fast forward two decades and into 2020, Microsoft’s market capitalization increased fivefold. In the meantime, Facebook, Alphabet, Amazon, and Apple came to complete the 2020 top five.

However the moral of its story is that investing is more than buying today and selling tomorrow. Or, buying this year and selling the next one.

People tend to react to market news, political events, elections, and focus less on the actual intrinsic value of a company. Microsoft is also a dividend-paying company.

An investor from twenty years ago that did hold the shares and reinvested the dividend will have enjoyed the power of compounding – the most powerful way of building wealth.