Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio) said during the insurance conglomerate's annual shareholder meeting on Saturday that the top 20 stocks by market cap today are significantly different than the top 20 stocks by market cap in 1989.
The "Oracle of Omaha" discussed several key observations between the largest companies 30 years ago and the largest companies today, including the observation that none of the top 20 companies in 1989 are still among the top 20 today.
U.S. companies populate the list today
Buffett discussed that the top 20 companies by market cap in 1989 included several Japanese banks and U.S. companies like Exxon Mobil Corp. (XOM, Financial), General Electric Co. (GE, Financial) and International Business Machines Corp. (IBM, Financial). Despite this, none of the aforementioned stocks are in the top 20 companies by market cap today: Buffett added that the "world can change in dramatic ways" over a 30-year period.
Figure 1 illustrates the historical market cap for Exxon Mobil, the top U.S.-based stock on the 1989 list, compared to Apple Inc. (AAPL, Financial), the top U.S.-based stock on the current list.
Figure 1
Buffett also noticed that the largest company in 1989 had a market cap of just over $105 billion, compared to Apple's market cap of over $2.05 trillion. Further, LVMH Moet Hennessy Louis Vuitton SE (XPAR:MC, Financial), the 20th largest company by market cap, has a market cap of over $315 billion, approximately 10 times larger than the $30 billion market cap of Merck & Co. (MRK, Financial), which was in the same position in 1989. Figure 2 illustrates the historical market cap for Louis Vuitton and Merck.
Figure 2
The Omaha-based investor added that the significant increases in the market cap of companies suggests capitalism works: Buffett said that 1989 was "not a high-inflation period" yet the market cap of the top 20 companies still increased at least tenfold by March 2021.
See also
Buffett's top five holdings as of the December 2020 filing are Apple, Bank of America Corp. (BAC, Financial), Coca-Cola Co. (KO, Financial), American Express Co. (AXP, Financial) and The Kraft Heinz Co. (KHC). Bank of America and Coca-Cola have market cap of approximately $348 billion and $235 billion as Figure 3 illustrates.
Figure 3
Disclosure: Long Apple, Merck and Coca-Cola.
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