Is Apple a Better Investment Than Exxon?

 |  Includes: AAPL, XOM
by: BubbleBustInvesting

It is official: Apple Computer (AAPL) bypassed Exxon (XOM) in market capitalization. Apple has also been a better investment than Exxon. But what does it mean for investors? Does a larger capitalization make Apple a better investment than Exxon?

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To answer this question, we must also look at other metrics, such as the ability of the two companies to raise barriers to protect their top line, as well as the effectiveness of their management to execute and boost the bottom line.

Though in totally different industries, both Exxon and Apple Computer have a sustainable competitive advantage, that is, they do have barriers to their business that allow them to achieve above industry profitability over the long-term. Exxon’s sustainable competitive advantage can be attributed to scale, oil and gas rights, and a network of suppliers and distributors that shield the company from the entry of new competitors to the industry—Exxon competitors can be barely counted on one hand. Apple Computer’s sustainable competitive advantage can be attributed to innovation protected by trademarks and patents, and its branding that is hard for the competition to copy and replicate.

Exxon’s and Apple's sustainable advantages are reflected in a number of financial metrics, low PE, hefty operating margins and rapid revenue and earnings growth. Obviously, they both make good investment choices. But which one is a better choice?


Market Capitalization

Operating Margin

Quarterly Earnings Growth (yoy)

Quarterly Revenue




Forward PE

Apple Computer














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*Sep. 25, 2012

It depends on the financial goals and objectives of different investors. Investors who seek income and steady capital appreciation are better off with Exxon, as the company pays a 2.70 percent dividend (Exxon also has a low Beta). Investors who seek capital appreciation and are prepared to stomach some volatility should go with Apple Computer.

Disclosure: I am long AAPL.