What History Says Is In Store for Apple

History lesson in AAPL

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  • Apple (Nasdaq: AAPL) became a trillion dollar company. Many reports indicated that Apple was the first company to be worth at least $1 trillion but that’s not true. Apple is the first U. S. company to reach that milestone.

    Over time, Apple’s stock has climbed consistently higher towards that milestone.

    AAPL quarterly chart

    Chinese oil giant PetroChina, which reached the milestone more than a decade ago. Did not fare too well after that.

    PetroChina’s market cap hit $1 trillion in 2007 following a successful debut on the Shanghai Stock Exchange on Nov. 5 of that year. The company’s Shanghai-listed shares nearly tripled at the open that day, with its Hong Kong-listed shares following them higher. (It had debuted on the Hong Kong exchange years earlier.)

    The rise gave the company a market cap of $1.1 trillion on both the Shanghai and Hong Kong exchanges. But, as CNBC notes,

    “It was all downhill from there, however. PetroChina’s market value plummeted to less than $260 billion by the end of 2008, representing the largest destruction of shareholder wealth in world history, according to Bloomberg.

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  • Blame the financial crisis and a collapse in oil prices. When PetroChina made its debut in 2007 brent crude prices were at one point, above $140 a barrel. Today they are about half that.” The tracking stock available in the U. S. shows the rapid rise and fall of PTR.

    PTR monthly chart

    History Shows PetroChina Might Be an Anomaly

    There were a unique set of circumstances involved in PTR’s rapid gains. There was a bubble in the oil markets and there was also a bubble forming in Chinese stocks. PTR was uniquely positioned to benefit from two bubbles and the collapse was what market historians would expect to see after a bubble.

    Without any other trillion dollar precedents, we can review other important milestones in market history. For example, the first company to record a $1 million market cap was the Bank of North America.

    The Bank of North America, was a private bank first adopted on May 26, 1781 by the Confederation Congress, chartered on December 31, 1781 and opened in Philadelphia on January 7, 1782.

    It was based upon a plan presented by US Superintendent of Finance Robert Morris on May 17, 1781 that created the Nation’s first de facto central bank. When shares in the bank were sold to the public, the Bank of North America became the country’s first initial public offering.

    It was succeeded in its role as central bank by the first Bank of the United States in 1791. The Bank of the United States would become the first $10 million company when it began trading. This Bank had a charter for twenty years and became a political battle when the charter was up for renewal.

    Since that time, the United States has turned to the government to provide central banking functions and the Federal Reserve is not a publicly traded company as its early predecessors were.

    The first company to reach the $100 million milestone was the New York Central Railroad which achieved that milestone in 1878. The railroad connected New York City, Chicago, Boston, and St. Louis.

    1. S. Steel was the first $1 billion company. In 1901, J. P. Morgan issued $303 million in mortgage bonds, $510 million in preferred stock, and $508 million in common stock, creating a total capitalization of approximately $1.4 billion but less than half of that was in stock.

    Standard Oil also reached the $1 billion milestone, but its shares were not traded on the New York Stock Exchange because its chairman, John D. Rockefeller, refused to release financial statements. There were some shares traded over the counter, or on the curb in the language of the early 1900s.

    Standard Oil was broken up by the Supreme Court but, according to Global Financial Data,

    “By the time shares in Standard Oil that included all of its subsidiaries stopped trading in August 1912, shares were at 1100 giving Standard Oil a capitalization of $1.1 billion, making it the first company to be worth over $1 billion in history.

    It had only been in 1871 that all the stocks in the United States were valued at $1 billion, and now a single company had reached that valuation. In 1911, the entire stock market of the United States was valued at $16 billion so Standard Oil represented 6% of the capitalization all shares traded in the United States.

    For one brief month, Standard Oil was worth over $1 billion, but when the company was broken up, the value of Standard Oil fell from $1.1 billion to $400 million overnight. The aggregate value of Standard Oil and its subsidiaries remained over $1 billion, but the company was no more.”

    The first company to hit $1 billion in stock market capitalization on a listed exchange was AT&T in 1924. It would be broken up in 1982 because of monopoly concerns.

    General Motors was the first company to hit the $10 billion milestone in 1955. And, General Electric became the first company to hit $100 billion in market capitalization in 1995.

    Each of these milestones reveal important insights into the economy.

    Market Leadership Reflects National Economic Trends

    In the early days of the country, the banks were the center of business. They needed to provide funds for commerce and without banks, the economy was reduced to barter. The barter system did meet some rural needs but growth was impossible without banks.

    However, technology did not exist at that time to enable the growth of large corporations. That changed quickly in the 1800s and transportation companies became the backbone of the economic growth of the United States.

    Then, industry became the foundation of economic growth and after that, technology (AT&T) grew in importance.

    What’s interesting is that the largest companies of the past all stumbled. The chart of GE offers an example.

    GE quarterly chart

    The question now is whether or not Apple can remain on top. History says that the peak will be reached for a time, but another company will surpass Apple.

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