If you are inside the investment community, you may have read how Apple (AAPL) is now bigger than the 32 Euro Zone banks combined. This is a major feat for a company that specializes in consumer products. The Apple story is truly amazing, and it got me to look at some other amazing company comparisons. Here are five (based on Friday’s close). Be sure to add more in the comments section.
Best Buy= $9 billion
Netflix= $10.78 billion
Under Amour= $2.72 billion
Lululemon= $5.78 billion
Yahoo= $16.83 billion
Priceline= $22.34 billion
Combined Companies= $48.5 billion
Apple =$75 billion
Ford and General Motors combined= $71.2 billion
Amazon= $81.22 billion
What do these comparisons mean?
In the first example, I have identified Best Buy and Netflix. Best Buy makes $1.26 billion in net income a year. Netflix, on the other hand makes about $214 million. With Best Buy's growth slowing, many investors have been fleeing the stock. At today's prices, it looks to be a bargain, but the company needs to regain its growth. Netflix, a revolutionary brand, has run Blockbuster out of the industry and continues to have great potential growth into the future. From an investment standpoint, it’s all about potential growth, and Netflix continues to be a name worth talking about.
Under Armour is a brand name with a national presence on TV and in magazines. The company has been featured by universities and professional athletes globally. Yet, the company sells low margin clothing apparel to everyday athletes, and has gained minimal net income. Alternatively, Lululemon has been a game-changing brand thanks to the newest yoga craze and has grown based on its large margins with a limited advertising push. In this case, it's all about the margins, and consumers seem to be willing to spend $80 on yoga pants.
Yahoo continues to serve as a homepage for many Internet users and has used its many features to attract users. It continues to be in the top visited sites in the world. But what is Yahoo’s niche? The company seems to touch everything; travel, weather, mail, shopping, and so forth. Priceline, on the other hand, is much more defined, focusing entirely on travel and helping consumers purchase hotels, book flights, and rent cars. Sometimes being great at one thing instead of touching everything can help spur one’s growth.
A few of the top mobile phone makers (RIMM, NOK, and MMI) have been losing the battle of the consumer. They have been trying to keep pace with Apple, but the response has been extremely muted. Once a full-fledged juggernaut, Research in Motion has lost over half of its market value in under a year and needs to change its products. Nokia has been in a battle for relevancy and seems to be missing on each new model. Apple continues to win the race for the consumer, and is rewarded with nearly $25 billion a year in cash. New ideas and revolutionary products win in today's consumer race.
In the last example, we are looking at the combined market caps of two of America's largest and most iconic brands. Ford and General Motors have been struggling to regain their images and were very close to extinction only a few years ago. The industry brings large revenues (roughly $275 billion combined) but warrants much smaller margins and ultimately net income. Amazon is a much newer company that has grown with an entirely online operation. At present, the company has about $40 billion in revenues and seems to be stealing the online shopper. Amazon continues to take market share from many retail outlets and despite two low margin industries has captured a key new industry spurred by the Internet boom a decade ago.
What have we learned? Here are a few fundamental ideas investors should seek:
1. Future growth
2. High margins
3. Defined businesses
4. Revolutionary products
5. New industries
Disclosure: I am long AAPL, AMZN.