Return To Behemoth Stocks

Photo Credit: Benh LIEU SONG

Somewhat less than three years ago, I wrote two articles on Behemoth stocks [one, two], which I define as stocks with over $100 Billion of market cap.  Today I want to revisit those stocks, and those that have joined them.  The last time I wrote, there were 39 of them actively trading on US Exchanges.  Now there are 61, for a difference of 22.  24 stocks are new, and two have dropped out.  Let start with those two:

• Vodapone plc [VOD] sold off its interest in Verizon Wireless to Verizon, creating a lot of value, and returned a lot of capital to shareholders.  For those of us who were shareholders, I can only say, great job.  You made Verizon pay up, and you didn’t blow all of the new free capital on suboptimal projects.
• The stock price of Vale, SA [VALE] has gone down considerably (~40%).  China is no longer a giant vacuum cleaner for minerals The pace of China’s expansion has slowed, and that has had an impact on base metals producers like Vale.

This highlights three things:

• In a bull market, once you are big, you tend to stay there.
• If you want to create value for shareholders as a behemoth, you need to take radical actions that sell off parts of the company, and return capital to shareholders.  Managements should think, “How can we reorganize the company such that each component part will be better managed, and lines that we aren’t so good at are sold off.”
• In general, these companies are too large to be taken over; change must come from within.  Activists will only succeed if the managements let them.

Now let’s look at the new companies, which fall into six main groups: Consumer Oriented, Banks, Pharmaceuticals, Information Technology,  Industrials, and  Internet.

Consumer Oriented

• Anheuser Busch Inbev SA (ADR) [BUD]
• British American Tobacco PLC [BTI]
• Comcast Corporation [CMCSA]
• Home Depot, Inc. [HD]
• Visa Inc [V]
• Walt Disney Company [DIS]