BLOG: How to invest in the world’s biggest companies
There is something reassuring about investing in the world’s largest companies. After all, they’ve become leading names in their sectors for a reason. But is it actually worth investing in such household names?
The vast majority have successfully turned gems of ideas into a multi-billion dollar businesses, selling their products or services to enthusiastic international customers.
Many of them have instantly recognisable brands. Who hasn’t heard of Microsoft, Amazon, or Tesla? Even primary school children will be very familiar with these names. In many cases they have been absolute game changers and revolutionised their sectors. Can you imagine a world without smartphones?!
But is it actually worth investing in such household names? Well, this all depends on your attitude to risk and what you’re actually after from such an investment.
Benefits of large companies
Firstly, if you’re looking for the share prices to rocket then you’re probably better off sticking to smaller companies that are still firmly in the growth stage of their development. As the biggest companies on the planet are followed by an army of stock market analysts, the chances of them surprising on the upside is often fairly remote.
However, many do pay handsome dividends to their investors, which is particularly attractive for those wanting to generate an income. Such companies are also popular when times are tough as it’s felt their well-established business models will enable them to continue making profits. They also have a vast global customer base and the financial resources with which to tackle unexpected problems or fund moves into different areas.
Which are the biggest companies in the world?
So, which are the world’s biggest players? And which funds invest in them? Well the majority of the world’s 15 largest companies are from the US – 11 in fact. The other four are in Saudi Arabia, Taiwan, China, and France.
Technology giant Apple is currently the largest quoted company by virtue of its $2.39trn market capitalisation. The company’s iconic iPhones and Mac computers have particularly devoted customers, many of whom happily queue up all night to be among the first to snap up the latest products.
Although it’s not been immune to the challenging economic backdrop, it still managed to generate $117.2bn in revenue for the last three months of 2022. The company, co-founded by the late Steve Jobs in the 1970s, is currently the largest stock position in the AXA Framlington American Growth fund.
This portfolio, which is managed by the experienced Steve Kelly, invests in innovative companies with unique brands and intellectual property that can help them grow into market leaders.
Microsoft, the hugely popular software business founded by Bill Gates, is the second biggest company in the world with a $1.96trn market capitalisation. The business is best known for its suite of software products that includes Word and Excel, although it’s also involved in other areas such as cloud services and gaming.
It’s also been a great investment for shareholders over the past five years, with the stock having soared just shy of 200% from $92 to $266.62. At the moment, Microsoft is the largest stock position in the that’s managed by Taymour Tamaddon. Taymour seeks to invest in large US firms that demonstrate innovation and change, the best of which he will back with strong conviction.
Other corporate giants
Other names to be found among the top 10 largest companies include Tesla, the electric vehicle manufacturer led by the entertaining – and often divisive – Elon Musk. The US-based business, which currently boasts a market capitalisation of $655.98bn, is one of the holdings in the Baillie Gifford American fund.
This portfolio is run by a team of four co-managers that focus their attention on US companies that are capable of creating exceptional returns. Their other holdings include Amazon.com and Shopify, the multinational e-commerce company that enables businesses and individuals to sell online.
Elsewhere, the Brown Advisory US Flexible Equity fund invests in a number of large caps, including Alphabet, the parent company of search engine Google. It also holds the stock of Berkshire Hathaway, the holding company of Warren Buffett, who is arguably the most famous investor on the planet.
Darius McDermott is managing director of Chelsea Financial Services & FundCalibre