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There are a lot of things we know and love about Apple. We know that they are the makers of our beloved iPads, iPods, iPhones, iMacs and eveything i like and want. However when it comes to their financial performance and how well the business has done, we may not all be fully informed. Don’t despair.
If you still do not know, let me inform you that Apple is the largest company on ths US stock market. As the Economist reported on March 24, 2012 “Apple’s shares have risen by nearly 50% this year, making the company the most highly valued on the American stock market, at more than $550 billion.”
Apple's 10 Year Stock Market Performance
To put it in perspective, Apple is a consumer company that has risen past larger and older more capital intensive companies with bigger balance sheets. However remember that the value of a business is not totally tied to size or age. It has a lot to do with performance and public perception. The Economist continues;
For much of the past 20 years, three companies have alternated in the role of the largest, by value, on the American stock market: Exxon Mobil, General Electric and Microsoft. The first two are very big companies by Apple standards. Exxon Mobil has annual revenues of $486 billion and GE employs 301,000 people; Apple had annual revenues of $108 billion in its last fiscal year and its workforce numbered just 60,000.
The value of a company is calculated by taking the number of shares and multiplying by its share price.
Company Performance and Era
The economist has also made an interesting point by highlighting that in each era, the company that ruled the stock market as the largest also did so because of the significance of their products or services at that time. So what does that say about Apple’s products and the industry, and what does it say about the age that we are in?
Exxon Mobil’s spell at the top of the rankings illustrated the importance of energy resources at a time when rising demand from Asia caused the oil price to rise more than fivefold over the past decade. GE’s reign illustrated the close links between modern industry and finance: GE Capital contributes almost half of the conglomerate’s profits. Microsoft ruled the age of desktop computing.
Three Lessons We Can Learn
What can we learn from Apple’s dominance of the US stock market? How does it relate to us? How does it relate to the products we use? What can I learn as a young investor?
Well there are lots of lessons to be learnt, but look at these three (read the article for more details).
1. The free market can still be remarkably innovative
In the past 11 years Apple has launched three products—the iPod, iPhone and iPad—that have created brand new markets, fulfilling desires that consumers did not even know they had.
2. It is possible to earn high margins with brilliant design and creativity.
Apple’s products are among those with the highest margins, low cost structures, and brilliant design. Their prominence is not by happenstance, they have cultivated a culture of excellence.
3. Apple’s rise shows that, even in a period of austerity, consumers are willing to pay for the must-have gadget
The Economist reports that “The company is a huge beneficiary of globalisation: able not only to source its products at low cost in Asia but to sell the finished goods there as well…”
What have you learnt from Apple’s rise in prominence?
