The New Top 10 Giants of American Industry

Update: Apple became the most valuable company Wednesday as its stock closed at $363.69, giving it a market capitalization of $337 billion. Exxon shares fell to $68.03. That means the oil giant now has a market cap of $331 billion.

Tuesday, Apple (AAPL) briefly passed ExxonMobil (XOM) to become the most valuable company in the world. The news sent shockwaves through the financial world: Here was a company that sells high-end discretionary electronics overtaking the consummate king of American industry -- a corporation that reigns over $100 oil and regularly sees more than $10 billion in profits on a quarterly basis.

However, the changing of the guard from Exxon to Apple is part of a larger trend. During the past four years, large technology companies have risen in prominence while other industries like energy and banking have fallen out of favor.

Just look at the 10 largest companies a mere four years ago:

The 10 Most Valuable American Companies in 2007

Market Cap (in millions)
General Electric (GE)
Microsoft (MSFT)
AT&T (T)
Citigroup (C)
Bank of America (BAC)
Procter & Gamble (PG)
Cisco Systems (CSCO)
Wal-Mart (WMT)
Chevron (CVX)
Source: Capital IQ, a division of Standard & Poor's.

That Was Then...

Remember, four years ago was a time of phony banking profits and rising oil prices. Not surprisingly, Exxon was far and away the largest company, while General Electric, Bank of America, and Citigroup all were still riding the housing bubble to record profits.

Of course, as we know now, none of these situations was built to last, and that pedestal quickly crumbled.

...This Is Now

After the crash in housing and an oil price roller-coaster ride, we find today's landscape. Out are the General Electrics, Citigroups, and Bank of Americas of the world. In their place sit Apple, IBM (IBM), and Google (GOOG). Exxon still tenuously holds the top spot (as of yesterday's close), but will likely drop below Apple in coming weeks.

The 10 Most Valuable American Companies Today

Market Cap (in millions)
International Business Machines
Berkshire Hathaway (BRK-A) (BRK-B)
Johnson & Johnson (JNJ)
Source: Capital IQ, a division of Standard & Poor's.

The shuffling list of super-huge stocks is just that: a list. A more holistic look at the rankings reveals three more practical takeaways for investors:

1. America is still No. 1 in technology: As much as Silicon Valley gets derided for constant bubbles and crazy business ideas, there are few industries in which America is as dominant as technology. The reason for this is simple: Our technology firms are great at creating the underlying platforms on which other technologies are built. That might sound complex, but it's a simple idea. Windows is the basic operating system for computers. Google is the main search engine used by most the world. Apple controls the most profitable operating system for mobile devices.

All these companies hold the most basic building blocks of technology, so it's extremely difficult to come up with new technologies that make them obsolete.

2. If you're afraid of turbulent markets, buy dependable brands: Right now, we're in a market where up and down swings of 5% are common and there's a distinct whiff of panic in the air. If you're looking for safer plays that still have potential to gain if the market runs up, look no further than large companies selling consumer staples.

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Companies such as Coca-Cola (KO), Wal-Mart, and even Procter & Gamble aren't flashy names, but all have outperformed the market in the past four shaky years. Unlike other names, such as Exxon or big banks, they're not at the whim of external factors like energy prices or financial markets that can swing wildly. Instead, they sell products that consumers keep scooping up even in tough economic conditions. Best of all, they have established international presences in foreign markets that can keep growing even if the U.S. stagnates. Which leads to a final takeaway from the market-cap shuffle...

3. Growth overseas is good for brands, bad for the domestic jobs outlook: The 2008 recession caused a steep drop-off in jobs and the unemployment rate currently sits at 9.1%. Coming off a record earnings season from corporate America, you might expect that figure to keep dropping in spite of fears of a worsening general economy. Don't count on it.

The problem is that American companies are quickly becoming global companies. More than 50% of earnings growth in the S&P 500 is from abroad. That means while American companies might be posting record earnings, they're pouring resources back into the areas where they're growing, which is outside the United States. That American brands are so enduring abroad and can be so successful in foreign markets is great news for investors, but it's also sour grapes for Americans looking for jobs.

Eric Bleeker is the technology editor for You can follow his Twitter @bleekertech. Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Coca-Cola, Johnson & Johnson, Microsoft, International Business Machines, Berkshire Hathaway, Wal-Mart Stores, and Google. The Fool owns shares of and has opened a short position on Bank of America.

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