Publicly traded companies hitting a $1 trillion market cap is psychologically fulfilling but pretty rare. Of the more than 8,000 securities investors can choose from, just five in the U.S. have hit a valuation of $1 trillion or higher: Apple , Microsoft , Amazon , Alphabet , and Facebook .
But we also know that the U.S. and global economy will grow over time. This growth, coupled with ongoing innovation, should allow additional companies to attain the psychologically important $1 trillion valuation. The following four stocks look to have all the tools needed to become $1 trillion companies by the turn of the decade. Image source: Getty Images. Berkshire Hathaway
One of the surest ways to build wealth for more than five decades has been to hitch a ride on billionaire Warren Buffett’s coattails. Buffett has been the CEO of conglomerate Berkshire Hathaway ( NYSE:BRK.A )( NYSE:BRK.B ) since 1965, and in that time has led his company’s shares to an average annual return of 20% . Including year-to-date gains in 2021 for the Class A shares (BRK.A), Buffett has overseen aggregate share gains of close to 3,400,000%!
One reason Berkshire Hathaway has so consistently delivered for shareholders is Buffett’s cyclical tendencies . Even though recessions and contractions are a normal part of the economic cycle, the Oracle of Omaha is keenly aware that economies grow over time, and that periods of expansion last substantially longer than contractions. He’s piled his company’s capital into sectors that thrive from periods of expansion, such as technology, financials, and consumer staples.
Warren Buffett is also a huge fan of dividend stocks. Despite Berkshire Hathaway never paying a dividend, the company is on pace to collect more than $5 billion in dividend income this year. Relative to Berkshire’s cost basis, we’re talking about a 5% yield on cost, which is exceptionally good. Since dividend stocks are usually profitable and time-tested, they’re the ideal type of company Buffett looks to add to Berkshire Hathaway’s portfolio.
Although Buffett won’t be leading Berkshire Hathaway forever, the company will be in good hands with investing lieutenants Todd Combs and Ted Weschler exerting their influence. Combs and Weschler have been adding a number of innovative growth companies to Berkshire’s portfolio in recent quarters to take advantage of the outperformance of growth stocks.
Given Berkshire Hathaway’s track record, it looks like a sure thing to hit a $1 trillion valuation well before 2030. Image source: Square. Square
Whereas Berkshire Hathaway’s current market cap is the closest on this list to $1 trillion, fintech stock Square ( NYSE:SQ ) is the furthest away ($123 billion market cap). But that doesn’t mean an eightfold return from this point isn’t possible by 2030.
Square’s bread-and-butter operating segment for more than a decade has been its seller ecosystem. This is the division that provides point-of-sale devices, analytics, and loans to help merchants grow their business. In the seven years leading up to the pandemic, gross payment volume (GPV) for the seller ecosystem surged from $6.5 billion to $106.2 billion. In 2021, GPV will likely top $140 billion with ease.
What’s more, the seller ecosystem is generating more of its GPV from larger merchants (i.e., those with $125,000 or more in annualized GPV). Since this is a merchant fee-driven segment, bigger merchants mean more gross profit potential for Square.
However, the company’s long-term growth potential will be dictated by digital peer-to-peer payment platform Cash App. In the last three years, ended 2020, Cash App’s monthly active user (MAU) count more than quintupled to 36 million . What’s more, Square is bringing in $55 in gross profit per MAU, compared to spending only $5 per user to attract new users. That’s one heck of a margin.
What’ll tie everything together is Square’s pending acquisition of buy now, pay later company Afterpay . Afterpay will help Square create a closed payment ecosystem, which means merchants will be able to accept Cash App. Tying these services together could allow Square to be one of the decade’s fastest-growing financial services companies. Image source: Getty Images. Salesforce
Another fast-growing mega-cap stock with a really good chance of hitting a $1 trillion valuation by 2030 is cloud-based customer relationship management (CRM) software provider Salesforce.com ( NYSE:CRM ).
CRM solutions are used by consumer-facing businesses to enhance client relationships and lift sales. Aside from simple tasks like logging and accessing real-time data, CRM software is used to manage online marketing campaigns, run predictive analyses on an existing client base, and oversee product or service issues. It’s a commonly deployed solution in […]
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