July 12, 2021 BARRON’S 7
STREETWISE
Visa shares have returned an annualized 28%
over the last decade. If that pattern holds, Visa
would reacha $1 trillion market value by 2024.
Washington Has
A Trillion Reasons
To Regulate Big Tech
each of which are worth at least $
billion. Shopify (SHOP) got a less
obvious mention. The company is way
down the market-value rank at $
billion. It has become something of the
anti-Amazon, providing bricks-and-
mortar vendors and other businesses
with easy e-commerce tools. While
Amazon.com (AMZN) seeks to fend
off regulation and a potential breakup,
Shopify can keep its head down and
continue to recruit new business.
I’ll place my bets on Visa getting to
$1 trillion next, even if it takes a while.
The company is closely tied to the
economic recovery, since it gets a cut
of transactions that run through its
global electronic-payments network.
The business, which is part tech
and part financial services, has a long
tailwind as cash usage declines
around the world. Visa shares have
returned an annualized 28% over the
past decade. If that pattern holds, Visa
would reach $1 trillion by 2024.
While the next trillion-dollar stock
is clearly a guessing game, one thing is
clear: Large numbers have been no
impediment to future gains. Apple
(AAPL) has returned an annualized
44% since it became the first U.S.-
listed company to reach a $1 trillion
value in August 2018. The stock
closed at a record this past week, giv-
ing it a market value of $2.4 trillion.
I asked Denise Chisholm, Fidelity’s
sector strategist, if the so-called law of
large numbers would ever kick in.
“Size is not particularly predictive one
way or the other,” she says. “The S&P
information technology, as a percent
of overall S&P, is now in excess of
20%. Does that have any meaning on
whether or not that group or that sec-
tor can outperform in the future? The
answerreallyisno.”
Right now, the trillion-dollar mem-
bers have momentum on their side. “A
ball in motion tends to stay in mo-
tion,” she says.
Tech’s secret sauce has been contin-
uously expanding profit margins, with
valuations that are essentially in line
with their historic norms. Operating
margins for the S&P 500’s informa-
tion technology sector have doubled in
the past 15 years, to a recent 21%, ac-
cording to Yardeni Research, while
overall S&P 500 margins have been
static at 10% or so (excluding a col-
lapse during the financial crisis).
T
ech’s magic—and those tril-
lion-dollar club passes—are
now hitting up against the
increased likelihood of reg-
ulation. “The sheer fact of the head-
line of the trillion-dollar club is going
to bring even more regulation,” says
Jim Paulsen, chief investment officer
of The Leuthold Group.
On Friday, the Biden administra-
tion signed an executive order that
calls for a “whole-of-government ef-
fort to promote competition in the
American economy.” The order, which
consists of 72 initiatives, is simultane-
ously broad and narrow. It pushes
against consolidation while also ad-
dressing consumer pain points, like
early-termination fees for broadband
services, hard-to-fix consumer de-
vices, and airline baggage fees.
By now, the Biden administration
recognizes that tech regulation isn’t a
slam dunk with the public. Despite
unease around data and privacy prac-
tices, less than half of U.S. adults are
in favor of more tech regulation, ac-
cording to a 2020 Pew Research poll.
Privacy regulation is politically
complicated, especially if it means
reining in the advertising that enables
free services like social media, internet
search, and email. But there isn’t
much controversial about limiting
broadband charges or making it easier
to fix a smartphone battery. The
White House seems to be attacking
companies where it hurts—their
mixed record of customer service.
For now, investors continue to gen-
erally overlook regulation. All five
members of the trillion-dollar club
were either higher or flat on Friday in
the wake of Biden’s executive order.
It’s time to take regulation more
seriously, says Ed Yardeni, president
of Yardeni Research. “A trillion here, a
trillion there attracts a lot of attention
from politicians.”B
By Alex Eule
The Next to a Trillion?
U.S.-listed stocks
Company / Ticker Market Value (bil)
Apple / AAPL $2,
Microsoft / MSFT 2,
Amazon.com / AMZN 1,
Alphabet / GOOGL 1,
Facebook / FB 980
Tesla / TSLA 629
Berkshire Hathaway / BRK.A 626
Alibaba Group Holding / BABA 551
Taiwan Semiconductor Manufacturing / TSM 544
Visa / V 505
Nvidia / NVDA 496
JPMorgan Chase / JPM 457
Johnson & Johnson / JNJ 445
Walmart / WMT 391
UnitedHealth Group / UNH 387
Source: FactSetL
ate last month, Face-
book notched what
could be its most nota-
ble achievement yet: Its
market value hit $
trillion. Just five U.S.-
listed companies have
reached the $1 trillion mark—or 0.08%
of the total number of stocks currently
traded on the New York Stock Ex-
change and Nasdaq. That’s roughly the
odds of a high school basketball player
making the National Basketball Asso-
ciation. It’s an elite club.
Now that Facebook (ticker: FB) has
earned access—its market cap was
down slightly by the end of the week,
to $980 billion—we might be waiting a
while for the next entrant. That’s
partly because the federal government
wants to rein in big business, but also
because the current trillion-dollar
members have a natural incentive to
keep the club small.
There’s a big drop-off to the next
candidate for membership—call it the
Trillion-Dollar Cliff. Among U.S.-
listed companies, Tesla (TSLA) is
next up, with a market value of $
billion, followed by Berkshire Hath-
away (BRK.A), Alibaba Group
Holding (BABA), Taiwan Semicon-
ductor Manufacturing (TSM), and
Visa (V).
We’ve covered all of those stocks
closely at Barron’s , and I’ve spent the
past few weeks talking to colleagues
about which company might be next.
I’ve also queried sources and polled
readers of our daily Review & Preview
newsletter. A few names get repeated
mentions: Tesla, Nvidia (NVDA),
Visa, and JPMorgan Chase (JPM),
Banca do Antfer
Telegram: https://t.me/bancadoantfer
Issuhub: https://issuhub.com/user/book/