The Forbes Global 2000: The World's Most Important Companies

by: Nicholas Vardy, CFA

The Forbes Global 2000 is Forbes magazine's annual survey of the world's largest companies. The ranking is based on Forbes' own weighting of company sales, profits, assets and market value. Of course, rankings are all in how you slice and dice the numbers. Yet despite their inevitable subjectivity, the Forbes rankings do give a sense of the ever changing landscape among the world's most important companies.

The Forbes Global 2000: The Top 100

U.S. companies dominate the top of the list. They account for six out of the top 10 global companies, with Citigroup (NYSE:C), Bank of America (NYSE:BAC), GE (NYSE:GE), JP Morgan Chase (NYSE:JPM), AIG (NYSE:AIG), and Exxon Mobil (XM) leading the pack. The U.S. companies' influence wanes as you start going down the list, however. While nine of the top 20 are U.S.-based, only 21 out of the top 50 are American. By the time you get into the top 100, only one third -- 33 to be exact -- of the companies are U.S.-based.

In contrast, "Old" European companies were astonishingly robust, boasting 10 of the top 20 companies -- outranking even the United States. The Europeans also hold their own as you go down the list, accounting for 24 of the top 50, and exactly one half of the top 100. It turns out that Europe -- and this includes non-EU members like Norway and Switzerland -- has a third more global companies than the United States.

The list provides a few other surprises. Remember Japan -- the world's second largest economy -- and the country that was set to dominate the U.S. 20 years ago? It managed only two companies out of the top 50, and seven out of the top 100.

The other surprise? Asia. For all the press about the "Asian Century," only six Asian companies (excluding Japan) made it into the top 100 -- Korea's Samsung and five Chinese companies that are mostly state-controlled. Equally surprising is the poor showing of the fast-growth, BRIC countries whose economies, Goldman Sachs predicted, are set to become bigger than the G-7 in 30 years time. Only one Russian company, natural gas giant Gazprom, and one Brazilian company, oil giant Petrobras, made it into the top 100. Perhaps most surprisingly, Indian companies were completely absent from the top 100.

But by sheer market value, U.S. companies hold their own. Last week, the London-based Financial Times trumpeted that the market value of European companies had surpassed that of U.S. companies. The Forbes 2000 list tells a different story, with American companies valued at $13.9 trillion versus only $8.2 trillion for their European rivals.

The Forbes 2000: The Shifting Sands of Rankings

The Forbes 2000 list reveals some other trends, as well. The list has 191 new names joining its ranks in 2007. That comes out to annual turnover of just under 10%. But the top end of the list is remarkably consistent. Citigroup (C) always has been #1, showing that top companies are as robust -- and slow moving -- as aircraft carriers. But that does not mean former market leaders cannot be deposed of their past glory. Iconic names such as IBM dropped out of the top 50 this year -- something unimaginable only 10 years ago.

Sectors matter also. Banking and energy privatizations in places such as China and Russia have reordered the top ranks. By market capitalization, three Chinese banks are in the top 10 -- though not by Forbes' own, more refined measure. Oil and other commodity companies have climbed steadily up the rankings. Two laggard sectors are retailing and media. Wal-Mart (NYSE:WMT) has been fading and media giant Time Warner (NYSE:TWX) ranks only #67. The once-mighty automobile sector -- with the exception of Toyota -- is fading fast. American icon General Motors -- though still #1 in sales -- ranked only #513 on the Forbes list.

Silicon Valley makes a surprisingly poor showing. Not a single Silicon Valley company -- Cisco (NASDAQ:CSCO), Ebay (NASDAQ:EBAY), Yahoo (NASDAQ:YHOO) -- make it into the top 100. Even current wunderkind Google (NASDAQ:GOOG) made it only to #289. Despite a recovery in the land of the Rising Sun, 38 Japanese companies fell off the list this year. Companies also have to be bigger than ever to make it into the top 100. Three years ago, the company ranked #100 had sales, profits and market value roughly half the size of Germany's BASF, which took the #100 spot this year.

The Forbes Global 2000: China Rising

Despite its modest showing in the top 100, mainland China claimed 44 spots in the Forbes 2000, up from just 28 last year. That's still only 2.2% of the Forbes Global 2000 and that's largely thanks to the current mania in the domestic Chinese stock market. After half a decade of underperformance, six out of the top 10 best-performing stocks in the Forbes Global 2000 were Chinese. And these six winners had an average gain of 241%. The 28 Chinese stocks from last year are up an average of 38%. That compares with an average price gain last year of 17% for the Global 2000 and 10% for the S&P 500.

Lists like the Forbes 2000 are only a snapshot in time. But the surprising rise of European multinationals, as well as the growing importance of emerging economies, confirms that the days when IBM (NYSE:IBM), General Motors (NYSE:GM) and Coca Cola (NYSE:KO) dominated the pantheon of global companies are forever gone.

Disclosure: none