Top 100

Western Revival

Apple-Sergi Reboredo-agefotostock-Avenue Images
Apple leads the western comeback.
  • Why it matters

    Why it matters

    The top three – all U.S. companies – are worth more than all 30 companies listed on Germany’s blue-chip DAX index.

  • Facts

    Facts

    • China is the only Asian company with a significant number of companies in the top 100.
    • Russia’s most expensive company, Gazprom, is ranked only 173rd.
    • Five German companies were among the top 100.
  • Audio

    Audio

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From an economic perspective, the global trend is clear: The industrialized West is losing ground to the emerging markets.

If Europe and North America accounted for nearly two thirds of the global economy in the first years of the millennium, today it’s only about half.

And yet a look at the world’s most valuable companies tells a different story. Those dominating global markets, especially in high-tech sectors, are not from emerging markets but from North America and Europe.

The bottom line: While emerging markets may be growing their own economies, they’re still struggling to produce big global players. Even those companies that once showed that potential have failed to push their Western rivals aside.

According to Handelsblatt market research, 81 of the 100 most valuable companies come from North America and Europe.

Apple, Microsoft and Exxon Mobil lead the ranking. In 2014, they earned over €70 billion, more than all 30 companies listed on Germany’s blue-chip DAX index combined. Five German companies made the top 100 list, with pharmaceutical giant Bayer the highest ranked at 57.

“With information technology, the United States dominate a key industry.”

Thomas Harms, Partner at EY Management Consulting

More than ever, the global business world is controlled from the headquarters of Western enterprises.

That wasn’t always the case, however. In the 1980s, Japan was setting the pace of the global economy. Corporate earnings were rising and the real estate market was booming, as share prices broke one record after the next. More than half of the most valuable, publicly traded companies in the world were from the Asian country. Today, carmaker Toyota is the only Japanese company still on the list.

At the beginning of the new century, companies from emerging economies – Russia, Brazil, India and China – dominated the world’s markets. But that, too, remained a snapshot in time.

Brazil has only one company among the top 100, and India not a single one. For the first time since the collapse of the Soviet Union, Russia is not even listed. With a market value of €46 billion ($56 billion), the country’s most valuable company, Gazprom, is ranked only 173rd.

China is the only Asian country to retain its dominant position, with 13 companies listed. Traditionally, its banks have been good performers. But with the Internet company Alibaba, ranked eleventh, the country has also been able to penetrate the lucrative information technology sector.

Whether Chinese startups will ever give U.S. high-tech giants a run for their money remains to be seen. “With information technology, the United States dominate a key industry,” said Thomas Harms, a partner in the EY management-consulting firm.

Fifty-two of the 100 most valuable companies on the globe are headquartered in the world’s largest economy, and two of them, Microsoft and Apple, are in the IT sector. These two firms and Exxon have a combined value of €1.1 trillion.

Strong increases of their stock prices have helped push up their market values. Microsoft’s market capitalization rose 39 percent in 2014, Apple’s 43 percent and Intel’s 52 percent.

 

The Biggest German Firms-01

 

In addition to the U.S. companies, the share prices of many companies in crisis-ridden Europe also rose significantly.

The most expensive German company on the list, ranked 57th, is chemical maker Bayer, with a market value of €94 billion. Four other German companies, VW, Siemens, Daimler and software maker SAP, were among the top 100.

Germany’s most expensive company, Bayer, and the euro zone’s most valuable company, Anheuser-Busch InBev, both achieved double-digit growth over the year. Swiss pharmaceutical giant Novartis, Europe’s heavyweight, managed to increase its value by a third.

This growth can be attributed to the fact that these companies have managed to more than offset losses or stagnating revenues in ailing European markets with booming business in the Far East and the United States.

This is especially true of the five largest German corporations in the top 100 ranking. Bayer earns 88 percent of its revenues abroad and sells half of its products in the United States and Asia. These numbers are even higher for SAP, Siemens and Daimler. VW sells more than a third of its cars in China. It is only through their overseas business that these five, highly globalized companies have successfully been able to escape the sales crisis in the euro zone for years.

“Shares in companies with historically high dividend yields have developed more favorably in the past than the overall market.”

Michael Clark, Fidelity

The total value of the 100 largest companies is €13 trillion, up €2 trillion from a year ago. Investors shouldn’t be concerned about a global market bubble. Corporate earnings grew by 15 percent in the past year to a record total of €882 billion – in line with the boom in stocks.

This means that the top 100 companies are currently paying investors 14.7 times their net income. That is roughly equal to the long-term average of 14.5 – a figure that is not characteristic of bubbles.

Companies with the highest projected earnings in 2014 are Chinese bank ICBC with €36 billion, followed by Apple and China Construction Bank with about €30 billion each.

Investors are rewarding companies for their continuity and strong profits with rapid share price gains. But many are also lured by attractive dividends.

“Shares in companies with historically high dividend yields have developed more favorably in the past than the overall market,” said Michael Clark of Fidelity, a multinational mutual fund and financial services group.

European companies have managed to more than offset losses or stagnating revenues in ailing European markets with booming business in the Far East and the United States.

This includes several companies across all industrial sectors, according to Handelsblatt’s analysis. The average dividend yield among the 100 most valuable companies is about 3 percent.

Best performing here are oil and gas companies, where investors can earn dividends ranging from 4.4 to 5.8 percent with shares in Royal Dutch Shell, Total and BP. Five percent is also a realistic dividend yield among the large pharmaceutical and telecommunications companies. Shareholders in the biggest banks can even expect to see yields of 6 percent or more.

Such high yields have attracted investors ever since fixed investments like savings accounts and bonds have yielded such low returns, the result of historically low interest ratesin most parts of the world. But analysts noted the emphasis isn’t just on stocks with high potential price gains or high, one-time dividends. Instead, investors are looking for reliable income.

“The most interesting stocks can be found in the overlap between steadily rising dividends and dividend yields of at least 3 percent,” said Andreas Hürkamp of Commerzbank.

The five German companies among the top 100 also appeal to investors with their shareholder-friendly dividend policies. For years, investors have earned higher-than-average dividend yields with shares in Daimler and Siemens, with yields currently ranging from 3.5 to 4 percent. Dividend yields at Bayer and SAP are around 2 percent, while VW is generating yields of about 3 percent.

The stock prices of SAP, VW and Bayer have doubled in the last five years. All three companies will likely increase their dividend payouts this coming spring for the fifth time in a row.

Dividends and share prices have been rising in unison for years – the best of all worlds for investors.

 

U.S. Firms Dominate-01

 

Ulf Sommer reports on companies, markets and finance. To contact the autor: sommer@handelsblatt.com

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