By David Sterman
Oil, technology, minerals and banking. Those are the industries that are host to the world's most richly-valued companies. In fact, with a market cap of more than $250 billion, these companies are larger than the gross domestic product (GDP) of countries such as Portugal, Egypt or Chile.
I'll tell you how you can profit from these titans of industry in a minute, but first, take a look at the five most valuable stocks on the planet:
|Company (ticker)||Market cap. ($M)||Description|
|Exxon Mobil Corp. (NYSE:XOM)||396,900||World's largest non state-owned oil and gas firm.|
|Apple Inc. (NASDAQ:AAPL)||313,751||Nine straight years of at least 28% sales growth for this tech giant.|
|Ind. and Comm'l Bank of China (OTCPK:IDCBF)||261,039||Largest of China's four quasi state-owned banks.|
|PetroChina Co. Ltd. (NYSE:PTR)||254,610||Aggressive acquirer of foreign oil fields.|
|BHP Billiton Ltd. (NYSE:BHP)||252, 323||Aluminum, copper, gold, silver, nickel - they mine it all.|
Joining this exclusive club is quite an honor, but you can be kicked out at any time. GE (NYSE:GE) was worth roughly $600 billion a decade ago, the biggest company in the world at the time, and now it doesn't even rank in the top 10. Microsoft (NASDAQ:MSFT) eventually overtook GE, but has since fallen to No. 6 in the world.
The fact that four of the nine largest companies in the world reside in China or Brazil should tell you we live in a changed world.
A Crystal Ball into the Future
How will this list look five years from now? Well, a look at each of the top companies' prospects gives us a pretty good idea about tomorrow's titans - and how you can profit.
1. Exxon Mobil
The odds are against this energy company retaining its top spot for one simple reason: buybacks. Shares outstanding peaked at 6.9 billion and have been falling ever since, to less than five billion currently. Management intends to stick with that plan, and the share count could fall below four billion in the next five years. Shares would need to rise about 25% simply to offset that trend, and that's not assured because this is now a slow-growth company. (2010 sales are likely to be on par with sales levels back in 2006). Then again, a fresh "super-spike" in oil prices would give a solid boost to shares. But surging oil prices have a way of creating conditions for a pullback as demand gets choked off.
Prediction: Exxon Mobil's market value will be less than $400 billion five years from now.
I'm in the minority on the prospects for this hot tech stock. The fickle world of consumer electronics means that it's hard to stay on top of the mountain for an extended period. (Just ask Sony (NYSE:SNE) or Microsoft). It's impossible to deny Apple's near-term momentum, stellar brand and stoked balance sheet (The cash pile has just grown to $60 billion). In all likelihood Apple will power even higher in coming weeks and months, as most analysts have very lofty price targets. But as the year plays out, shares are at risk. Investors are expecting a tremendous surge in iPad sales in 2011, after an already-stellar 2010, and any shortfall to current forecasts combined with the uncertainty surrounding co-founder and CEO Steve Jobs' health would punish the stock.
Prediction: Apple's market value works its way toward the $400 billion mark before starting a long and steady decline that puts it back in Google (NASDAQ:GOOG) and Microsoft territory (i.e. below $250 billion).
3. Industrial and Commercial Bank of China
Even if the world's largest bank failed to grow in coming years, it still looks poised to rise in value. That's because it increasingly looks as if China's yuan will appreciate 15%, 20% or even 25% at some point down the road.
A 20% move in the currency would push ICBC's market value above $300 trillion. Of course the fate of the Chinese economy will also play a role. The country's breakneck economic growth has not come without cost. Media reports note that China is sitting on a vast oversupply of newly-built apartment complexes, a number of which stand empty.
And who would be left holding the bag if real estate developers default on loans? ICBC and its banking peers. That could push the bank's market value down in coming quarters. But over the long-term, further growth in the Chinese economy looks inevitable, simply based on projections of rising per capita income.
Prediction: ICBC's market value swells to more than $400 billion at some point in the next five years, thanks to economic growth and currency appreciation.
To meet China's insatiable energy needs, PetroChina has been on a spending spree, snapping up energy fields on virtually every continent. Were it not for domestic concerns about energy security in the United States, PetroChina would likely have already been a very active buyer of U.S. energy plays. As is the case with ExxonMobil, rising energy prices would help to boost this company's value. Shares, which trade for $140, spiked to $263 in October 2007 when oil prices hit an all-time high of $140 a barrel. A repeat of that scenario would take PetroChina's market value north of $350 billion.
Prediction: A continuing acquisition spree helps PetroChina to overtake Exxon Mobil in four to five years as the world's largest publicly-traded energy concern.
5. BHP Billiton
BHP's exposure to a wide range of commodities helped this stock rise 150% in 2010. Commodity prices are rising on expectations that global economic growth will accelerate in 2011 and 2012 and demand will outstrip supply for many metals and minerals. But it's hard to make a case for a much higher spike in commodity prices. After all, firming prices have led to production increases in past economic cycles, capping any further gains. And as noted above, the Chinese economy may experience a hangover in the future, which would dramatically alter the supply and demand equation.
Prediction: Shares of BHP Billiton continue to appreciate - but at a much more modest pace, and the company's market value fails to crack the $300 billion barrier.
The Industrial and Commercial Bank of China could occupy the No. 1 perch five years from now. Google, Petrobras and China Construction Bank are knocking on the door. One of these firms is likely to end up on the leader board five years from now. My money is on Petrobras. The oil giant's massive R&D program should eventually set the stage for surging cash flow.
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.