TRUCKEE, Calif. — Last Monday, Apple officially became the largest company ever in terms of market cap. The market cap is not something you wear, it is a way to measure the size of a company.The popularity of Apple’s products has been nothing short of remarkable. I’m sure almost everyone is familiar with the iPhone, iPod, iPad and the Apple computer. These products have been truly revolutionary. Apple’s founder, Steve Jobs, died from cancer last October and is widely recognized as a true genius. On Monday, August 20th, the price of Apple’s stock gave the company a valuation of $623.52 billion, and it finally surpassed Microsoft as the largest company in US history. Microsoft’s peak valuation came in December 1999 at $616.34 billion.The term market cap means market capitalization and refers to the size of a company. Stocks are roughly divided into small cap, mid cap and large cap stocks. The terms micro cap and mega cap are also used and refer to very small companies and to the largest companies traded on the exchanges, like Apple, Microsoft, Exxon Mobil, Walmart, etc.The market cap of any company is very easy to determine. The formula for market cap is; price per share X number of shares outstanding = market cap. This gives you the size of the company in dollar terms or the valuation of the company. According to Capital IQ, Apple has 937.41 million shares outstanding. Outstanding means the total number of shares issued and available to trade. Every day, more than 14 million shares of Apple are traded.Though Apple is larger now than Microsoft was in 1999, if you adjust the prices for inflation, the 1999 value of Microsoft was higher. Apple would have to hit about $900 per share to surpass the inflation adjusted price of Microsoft at its peak. Microsoft’s valuation today is less than half of what is was in 1999 at $256.20 billion. The second largest company in the US right now is Exxon Mobil with a value of $405.97 billion.There are analysts out there who are predicting that Apple will become the first $1 trillion company in US history. One challenge that they are sure to face is that as a company gets bigger and bigger it is difficult to continue growing sales and developing new products at the same rapid rate.Kenneth Roberts is a Truckee based Registered Investment Advisor. Information on his money management service can be found at www.fusiontargetretirement.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
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