What Investors Can Learn from the Biggest Companies of the Past 20 Years

published 3 October 2012

Is Apple, the world's most valuable company, on its way toward an unprecedented market capitalization of $1 trillion? Or is Mapplegate, the fiasco surrounding the error-filled map app on Apple's new iPhone, a sign that the aura surrounding Apple and its seemingly bulletproof stock is starting to dissipate. If Apple were to fall from its lofty perch, it certainly wouldn't be a shock, because, let’s face it, it's tough to hold on to the top spot. Companies go in and out of fashion. Stock prices rise and fall. Consider that Microsoft became number one in September 1998 when its market value was a lofty $282 billion; as of October 3, it's valued at $250 billion. In September 1993, General Electric hit the alpha-spot with $84 billion; its current market cap is $242 billion.

The World's Biggest Companies Over the Past 20 Years

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Mike Miles was riding the bull when he took over as CEO in late 1991. Under his predecessor, Hamish Maxwell, Philip Morris had generated five consecutive years of earnings growth of at least 20% annually, thanks in part to acquisitions of General Foods in 1985 and Kraft in 1988. But domestic tobacco sales were slowing amid changing attitudes toward smoking. A flood of tobacco litigation also ensued.

Some blame the April 1992 passing of founder Sam Walton. Some analysts believeoverexpansion may have been an issue, too. To boost growth in 1994, the company doubled the number of its supercenters -- those now-ubiquitous discount store/grocery one-stop shopping concepts -- and increased by two-thirds the number of Sam's Clubs, its warehouse stores. But sales growth at existing stores, the traditional figure used to measure retailers, had dropped to 6% from 11% the year before. The toll was enough to unseat Wal-Mart.

This wasn't Ma Bell's first time on the throne -- she'd been queen of the markets in the early 1980s. That was before the phone giant (with a little nudging from the U.S. Department of Justice) divested its local operating companies in 1984 while retaining its manufacturing arm and long-distance operations. The breakup resulted in the creation of seven regional holding companies (aka Baby Bells), as well as a six-year stretch of steadily declining long-distance rates.

These were the reaping years for Jack Welch. He had been CEO of GE since 1981, and the fruits of his reign ripened in the 90s. He'd spent the previous decade slimming down the company and redefining it -- laying off employees, selling off manufacturing businesses and buying up financial-services firms. By the mid 90s, the conglomerate was in full swing with Six-Sigma -- the management strategy that, among other things, stressed rewarding winners and rejecting losers. General Eclectic became a market darling -- Fortune called it one of the world's "most admired companies" and Welch was named "manager of the century." Welch left the company in 2001.

Microsoft's ascent was fueled by 23 consecutive years of record sales and earnings (the company was founded in 1975; it went public in 1986). The colossus of Redmond had its share of lovers and haters. In June 1998, it launched its Windows 98 operating system in 40 countries. The software would end up on the overwhelming majority of new personal computers. But earlier that year, the U.S. Department of Justice filed an antitrust suit against Microsoft. About that time, the tech-stock boom of the late 1990s, fueled by the Internet and concerns about the changeover on computers to the year 2000, was accelerating.

In December 1999, a few months before the bubble burst, Microsoft shares peaked at a split-adjusted price of $58.72. The stock had doubled in 12 months and was trading at a whopping 70 times earnings (its historic average price-earnings ratio was about 30). When the party ended, Microsoft's stock suffered. It ceded its crown of most-valuable company in April 2000 -- only to regain it in June 2002 and hold it (most of the time) until September 2003. But the company has never fully recovered from tech bubble popping. As of October 3, Microsoft sells at ten times estimated 2013 earnings.

Think rising oil prices, which hit an all-time high in 2008. That year, the company clocked record revenues and profits. ExxonMobil has ranked among the ten largest companies in the country for decades. It remains today the world's largest publicly traded energy company. The firm's history stretches back more than 125 years and includes well-known brands long-since folded into the current incarnation, including Standard Oil, MobileOil, Esso, Mobile and Exxon. But falling commodity prices have hurt ExxonMobil's stock lately, making way for another company to be crowned king.

Walk the streets, sit in a restaurant, ride the train -- wherever you go, you'll see people using iPhones or iPads (or both). Wildly popular products explain why Apple has climbed to the top of the heap. The company's profits have grown at a stunning annualized pace of 59% over the past ten years, and it sits on an astounding $117 billion in cash. Apple's market value of more than $620 billion exceeds that of its nearest rival, ExxonMobil, by more than $200 billion.

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Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.