Alphabet – the company formerly knows as Google – has surpassed Apple as the company with the largest market capitalization in the world. So what? Why all the score-keeping about this stuff?
Yesterday, I linked to an article explains why “shareholder value” is a dumb idea. Looking at market capitalization to create a table of the most valuable companies is just as dumb. Since share price is often based on caprices, and share price doesn’t ever correlate realistically to shareholder value, this is just a way of fabricating news.
Market capitalization is a chimera. It’s based on the value of shares now, and it looks good when it’s high, but not so good when it’s low. But shares only really have value when you sell them. When the stock market is in a bubble, the financial news organs will tell you how much your shares are worth, but when there’s a “correction,” they claim that “X billion dollars have been wiped off the value of a company.” Neither of these are realistic, since that value is fictitious.
All that counts is whether a company’s share trend up or down, and how much it’s worth when you sell it. And of course, that’s all relative. Here’s Apple’s share price over the past three months:
And here’s the company’s share price over two years:
Sure, it’s been trending downward in the past six months, but it’s still up over the past two years. Unless you’re a short-term trader, the day-to-day price doesn’t make much of a difference.
So, this week, Alphabet is bigger than Apple. Next week it may be different. Big deal.