Prediction: these will be the 10 most important actions by 2035
If there is one constant on Wall Street, it’s that nothing stays constant for long. The combination of technological innovation, competitive advantages, acquisitions and other tangible and intangible factors tend to regularly shake the world’s largest companies.
For example, in 2004, General Electric, ExxonMobil, Pfizer, Citigroup, Walmart, BP, AIG, Intel, and Bank of America were nine of the 10 largest publicly traded companies by market capitalization. None are still in the top 10 just 17 years later. In fact, AIG isn’t even in the top 250 anymore.
What could the top 10 look like in 2035? Frankly, we don’t know. But given a number of high growth trends proliferating, that won’t stop me from making a prediction. In 14 years, these will likely be the 10 largest publicly traded companies in the world, listed in no particular order.
Unless the e-commerce giant Amazon.com (NASDAQ: AMZN) decides to part ways with its main cloud infrastructure segment, Amazon Web Services (AWS), I consider it to have the best chance of being the largest company in terms of market capitalization in 2035. Amazon currently controls over 40 % of all online sales in the United States. , and he’s signed up 200 million people to Prime around the world. The fees it collects from Prime memberships help ensure it can lower prices from physical retailers.
As for AWS, it increased its sales by 30% in 2020 (that is, during the worst economic recession in decades). AWS has a current execution rate of $ 54 billion in annual sales, which means it alone could reach a valuation north of $ 600 billion and still be priced low in the cloud space. Because AWS generates significantly higher margins than retail, this is Amazon’s key to a cash flow explosion in the years to come.
Despite a myriad of changes since 1999, the technological stock Microsoft (NASDAQ: MSFT) is the only company to remain in the top 10 by market capitalization in 1999, 2004, 2009, 2014, 2019 and today. So it’s a safe bet to suggest that he will stay in the top 10 for the next 14 years.
While Microsoft still generates a lot of cash flow from its legacy software and Windows operating system, the cloud is its future. The Azure cloud infrastructure service, along with enterprise and consumer cloud products from all of its major brands (Office, Dynamics, and Windows), can fuel sustainable double-digit or single-digit growth for a long time to come.
Additionally, Microsoft is teeming with cash, which means it can use acquisitions as a way to boost its growth prospects and stay competitive.
Speaking of milking cows, I believe Apple (NASDAQ: AAPL) safely remains in the top 10, even if its growth rate declines a bit. Keep in mind that Apple has generated nearly $ 100 billion in operating cash flow over the past 12 months, which means the company has a plentiful pile of cash to buy back its shares, pay out dividends, reinvest in innovation and make occasional acquisitions to strengthen its product. wallet.
In the years to come, Tim Cook will continue to oversee Apple’s transition to a service company. Subscription services offer higher margins than most products sold by Apple and will help reduce the flat-rate revenue associated with technology replacement cycles.
The social media space has proven to be particularly fickle over the past 15 years, so there is certainly a risk. Facebook (NASDAQ: FB) won’t be one of the 10 biggest companies by 2035. It could also be dismantled by regulators, potentially removing it from consideration.
However, I chose to keep Facebook in the top 10 for two simple reasons. First, 44% of the world’s population visited one of its held assets in the first quarter. So it’s unlikely that a social media company will destroy it in the eyes of advertisers anytime soon.
Second, Facebook has only monetized two of its four prized assets (its eponymous site and Instagram). When it decides to significantly monetize WhatsApp and Facebook Messenger, it will benefit from a massive growth spurt over several years.
As with Facebook, advertising-based operating models come with risk. Fortunately, Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) has ancillary operations and a story on its side.
When it comes to ancillary businesses, streaming content provider YouTube has emerged as one of the top three destinations for social media, and cloud infrastructure service Google Cloud now boasts an annual execution rate of over 16 billion. of dollars. Ultimately, Cloud will do for Alphabet what AWS has done (and will continue to do) for Amazon.
Meanwhile, Alphabet’s core business – its internet search engine Google – is expected to benefit from long periods of economic expansion and the company’s insane global share of internet search, which ranges from 91% to 93. % for two years.
Maybe the first big surprise is that I expect a stay and accommodation company Airbnb (NASDAQ: ABNB) to make it into the top 10. That’s because Airbnb is disrupting both the hotel side of the industry and the travel side of the equation.
Currently, Airbnb has 4 million hosts worldwide. This is only a fraction of what the platform is capable of handling given the more than 130 million residences in the United States and approximately 1 billion residences around the world.
Airbnb has also pushed its Experiences platform, i.e. adventures led by local experts. Nothing can stop Airbnb from becoming more rooted in vacation experiences. We are witnessing the first rounds of a real disruption in the leisure industry.
Fintech action Square (NYSE: SQ) also has a very real opportunity to surpass Pay Pal over the next 14 years and work their way into the top 10.
While Square is expected to experience steady growth from its seller ecosystem, the main driver of the company will be the peer-to-peer digital payment platform Cash App. In three years, the monthly number of active Cash App users has more than quintupled to 36 million. It’s a more popular download than PayPal’s Venmo, and Square generated $ 41 in gross profit per user, compared to less than $ 5 in acquisition costs per user.
Square also completed the charter process to operate its own bank in March. This gives the business a full suite of financial services it can offer in the high margin digital banking space.
Since May 25, the payment processing giant Visa (NYSE: V) held 10th place with a market cap of $ 487 billion, $ 3 billion ahead of JPMorgan Chase. I believe in 14 years it will hang in the top 10 and probably push above a $ 1 trillion valuation.
Visa is a cyclical business, which is a simple way of saying that it works great when the US and global economy is booming and struggles a bit when the recession hits. However, this is a numbers game that Visa is well prepared for. Periods of expansion last much longer than contractions. Plus, Visa is not a lender, which means it doesn’t have to put money aside for delinquent loans during a recession. This is why it is rebounding so quickly from economic contractions.
With the majority of global transactions still being made in cash, Visa’s growth track spans decades into the future.
In 14 years, Warren Buffett and Charlie Munger are unlikely to show up Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) or dictate its investments. Fortunately, Buffett has established a winning game plan for his successors that should translate into continued growth.
Similar to Visa’s growth thesis (Visa is one of Berkshire’s four dozen stocks), most of Buffett’s investment portfolio is tied to cyclical activities. The Oracle of Omaha has always prospered by playing the numbers game and betting on periods of economic expansion lasting several years. He also likes a good dividend, which is why Coca Cola and American Express have been so precious.
The wild card here will be investment lieutenants Todd Combs and Ted Weschler. If they stick with Buffett’s long-term approach and avoid trying to time the market, Berkshire Hathaway is expected to be one of the top 10 titles by 2035.
One final surprise that could find its way into the top 10 is based in Singapore Sea Limited (NYSE: SE). Going without a name a few years ago, Sea has three extremely fast growing companies that could all help it reach a trillion dollar valuation by 2035.
While mobile gaming is its primary driver of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) at the moment, it is the Shopee e-commerce platform that will be the primary driver of sales and profits for Long term sea. “But what about Amazon?” you ask? Do not worry. Sea is primarily focused on emerging markets where the middle class is still taking shape. The sea and the Amazon can thrive in their own distinct niches.
Sea also has a nascent mobile wallet segment that could provide financial solutions to the largely underbanked regions of Southeast Asia. It has all the tools to be one of the biggest companies in the world.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.