Despite its cold exterior, Wall Street is a sucker for symbolism. Take Apple’s displacement of Exxon Mobil as the world’s most valuable company by market capitalization this week.
Headline numbers can be misleading, though. Market caps don’t account for either debt or cash. Add this in, and Exxon’s enterprise value at Wednesday’s close of $337 billion still topped Apple’s $261 billion easily. So Exxon’s actual operating business remains more valuable.
Recall that, a decade ago, Microsoft enjoyed similar adulation and was worth more than Exxon (Apple barely registered on the chart). Today, Microsoft is worth about 40% less than Apple. That is a warning against extrapolating current trends into the future. But it also carries a hopeful message, not widely shared right now, about the U.S. economy’s ability to reinvent itself.
Two takeaways: one figure is not enough for the entire market, and market caps are what is hot for the trend setting firms. Not all firms or countries were born equal when it comes to market caps, the latter is full of subjective value assessments due to buying~