The trillion-dollar valuation club is not an easy one to reach. In fact, a grand total of just nine companies have reached this figure to-date. And some of them, like Petrochina (OTCMKTS:PCCYF), only briefly hit the mark before seeing their valuations decline.
Given that there have only been nine trillion-dollar companies to-date, it is no guarantee that we’ll see all that many more trillion-dollar firms in the near future. However, here are seven of the leading contenders to join this exclusive club in coming years.
Berkshire Hathaway (BRK-A) (BRK-B)
At a market cap of $750 billion today, it should be only a matter of time until Berkshire Hathaway reaches the $1 trillion threshold. Recently, Berkshire Hathaway’s valuation has grown dramatically due to its shrewd bet on shares of Apple.
However, investors shouldn’t lose sight of Berkshire’s portfolio of underlying businesses as well. I believe there is a great deal of value in Berkshire operations such as its railroad and insurance holdings.
Warren Buffett is now 93 years old. While he remains in good health, there will eventually be a changing of the guard at the company. It is quite possible that Berkshire will start paying a dividend, spinning off assets, or otherwise reshaping its portfolio in coming years, which could unlock a good deal of latent shareholder value.
Thanks to its world-spanning credit card business, Visa (NYSE:V) is one of the world’s largest financial companies today.
And it’s a good bet to think it will get a lot larger going forward. Visa has grown revenues at an 11% annualized compounded rate over the past decade, and free cash flow has surged 15% per year over that same period.
Visa benefits from a number of structural long-term tailwinds. First is the rise of electronic payments. Credit cards are still taking significant share from cash, especially in emerging markets. On top of that, the rise of the global middle class is creating hundreds of millions of shoppers with access to credit cards for the first time. And as a business that takes a percentage transaction fee, inflation and rising average transaction size naturally increase Visa’s bottom line as well.
While we’re at it, let’s throw Mastercard (NYSE:MA) in here as well. At a roughly $375 billion market cap today, Mastercard starts out a fair bit behind Visa ($490 billion) in the race to joining the trillion-dollar companies list.
That said, the two combined firms would be worth nearly a trillion dollars already and there’s good reason to think both of the credit card titans will eventually reach that threshold individually.
The reason why isn’t too hard to work out. As Morningstar’s Brett Horn put it: “[D]espite the evolution in the payment space, we think a wide moat surrounds the business and view Mastercard’s position in the current global electronic payment infrastructure as essentially unassailable.” When aiming for companies that can grow for the long-term, it generally makes sense to buy companies whose market position is nearly impossible to disrupt.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) is the world’s dominant semiconductor foundry; it has surpassed 50% total market share in recent years.
This makes the case for putting TSM among the potential trillion-dollar companies a very simple one. There will be a lot more chip sales in five or ten years than there are today. The explosion of new applications such as artificial intelligence and edge computing ensures that the overall market will continue to grow. And TSM is set to reap the rewards of that larger market thanks to its unmatched scale and technological prowess.
Could anything disrupt TSM’s inexorable climb? Geopolitics are a major concern, and understandably so. However, TSM is investing heavily in manufacturing capabilities outside of Taiwan – such as in Arizona – to make the firm more resilient. At this point, frankly, the electronics industry is so reliant on TSM that it is hard to imagine supply chains functioning without TSM being there as a focal point.
Exxon Mobil (XOM)
At first glance, it might seem odd to put Exxon Mobil (NYSE:XOM) on a list of future trillion-dollar companies. After all, isn’t oil obsolete and the industry heading on a path of slow decline? It certainly may have looked that way prior to recent years.
But then geopolitics happened. Between the war in Ukraine, violence in the Middle East, and rising concerns about the state of U.S.-Chinese relations, there is a lot going on. Meanwhile, the oil market has limited excess supply – a fact that shouldn’t be too surprising given the underinvestment in the industry over the past decade. With so much focus on renewables and decarbonization, less money has gone into finding new economic oil and gas deposits.
That said, Exxon Mobil has bucked that trend. It kept investing through the down years and that has paid off in a major way with large new fields coming online in places such as Guyana.
Exxon’s increased production will prove invaluable. Global experts forecast that oil demand will continue to climb until around 2030 and then plateau from there. This gives oil companies time for at least one more big bull run before the industry starts to move toward managed decline.
With Exxon remaining focused on oil and gas and having large profitable investments in the works, it has a good chance of ultimately reaching the $1 trillion market cap threshold later this decade. That’s especially true if oil prices cruise past $100/barrel.
Walmart (NYSE:WMT) was once a glamorous high-flying stock. In the late 1990s, shares traded above 40 times earnings and many momentum investors prized their WMT stock holdings.
The last 20 years have been much less kind to Walmart. The firm was slow to get a handle on e-commerce. Walmart’s reputation took a hit due to some scandals and negative media reports. And investors worried that Walmart had already become a mature company with few remaining growth opportunities.
However, Walmart has turned things around. The pandemic gave Walmart a chance to exceed customers’ expectations during those trying times, and Walmart has put together a much more robust omnichannel approach. That, in combination with its prowess in maintaining low costs and lean operations has put Walmart in great position to deal with the current inflationary marketplace.
An under-appreciated offering from Walmart is its international operations spanning two dozen countries. I’m particularly excited about Walmart de Mexico (OTCMKTS:WMMVY), the firm’s Mexican and Central American store operator. Walmart de Mexico is that country’s largest retailer and has enjoyed massive growth over the past 20 years as the Mexican economy flourishes. Walmart (the corporate parent) retains 70% ownership in Walmart de Mexico, allowing WMT stock owners to cash in on the Mexican economic boom. It might just reach trillion-dollar companies status yet.
At an approximately $160 billion market cap today, Danaher (NYSE:DHR) has the most work to do to reach the trillion-dollar companies status.
However, don’t count out Danaher. Historically, it has been an absolute growth machine. On a split-adjusted basis, Danaher shares went for around 10 cents each in 1983; they trade for more than $200/share today.
The company has delivered these life-changing returns through a pursuit of unceasing mergers and acquisitions. Danaher rolls up large chunks of an industry, optimizes and scales up operations, and generates best in class returns from those assets.
Recently, Danaher has made a strategic pivot. It has sold or spun off all of its industrial and non-core businesses to become an exclusively health care-focused firm which offers leading life sciences tools and equipment. Specifically, it is a large player in bioprocessing, which is an integral step in the creation of new pharmaceutical drugs and compounds.
Analysts suggest that bioprocessing could grow at nearly a 15% annualized rate over the next five years. This sets the stage for the next progression in Danaher’s long-running growth machine.
On the date of publication, Ian Bezek held a long position in DHR, WMMVY, V, XOM, and BRK-B stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.