Do you remember when General Electric was the largest company in the world? It really wasn't terribly long ago. The industrial giant wrested the market-cap crown away from software titan Microsoft when the dot-com bubble popped.

GE held on to the title with an iron fist for nearly two years:

GE MARKET CAP DATA BY YCHARTS.

Exxon takes over

By the summer of 2002, Microsoft had recuperated while oil producer ExxonMobil rose through the ranks. The top spot shifted between these three companies over the next four years, and then Exxon controlled the crown between 2006 and 2011:

GE MARKET CAP DATA BY YCHARTS.

At this point, Apple had turned its iPhone and iPad product lines into a world-class cash machine. Apart from a brief skirmish with Exxon in 2013, Cupertino monopolized the market cap throne for seven years:

GE MARKET CAP DATA BY YCHARTS.

What's new?

And now we're in the modern era. Apple is still the monarch of the market cap, but the title always seems to be within reach of Microsoft and e-commerce veteran Amazon. Online services expert and Google parent Alphabet has also joined the fray every now and then, but never quite managed to reach the top spot:

GE MARKET CAP DATA BY YCHARTS.

What have we learned from these charts?

In two decades and change, we've seen the business world shift away from oil producers and industrial-engineering companies while software, online services, and consumer electronics soared higher and higher. Amazon and Apple were mere minnows at the start of this adventure, with respective market caps of $27 billion and $17 billion at the turn of the millennium.

Over the same period, the early leaders have fallen out of sight. These days, General Electric and ExxonMobil are so far behind that they don't even belong in this conversation anymore. (The bigger they are, the harder they fall.)

Come back in another couple of decades, and the list of the market's largest market caps will probably look very different once more. Not even Apple and Microsoft are immune to market shifts and new challengers in the long run. The biggest winners in this millennium weren't the largest blue-chip companies at the start of the race, but the smaller and hungrier upstarts that were still piecing together their long-term business plans:

AAPL TOTAL RETURN PRICE DATA BY YCHARTS.

The post The world's most valuable companies from 2000 to 2022 appeared first on The Motley Fool Australia.

The share market has defied the real life gloom and doom to take investors upwards since March last year.

But eventually government stimulus will end, interest rates will rise, and the party will wind up.

So who will be left with a massive hangover afterwards?

Evans & Partners head of international equities Bob Desmond warned that there's always a serious risk some investors could see their capital "permanently impaired". 

Even in a bull market, some shares have certain hints that make it more likely that a devastating loss could come.

Desmond pointed out the 5 biggest warning signs to look out for:

Big debt

Borrowing money is a perfectly legitimate way to grow a business. 

But Desmond suggests keeping an eye on how much is borrowed and how the money is used.

He uses American Airlines Group Inc (NASDAQ: AAL) as an example to demonstrate how foolish some companies can be.

"In the five years to 2019, the company 'returned' US$13 billion in buybacks. This was despite the fact there was no capital to return, as free cash flow over the period was a NEGATIVE US$3.2 billion!" he said on Livewire.

"The ratio of debt to earnings before income, taxes, depreciation and amortisation (EBITDA) was 4.2 times in 2019 at the peak of the cycle."

Share buybacks are a common way for US companies to return capital to shareholders, similar to how dividends are regularly used in Australia.

Desmond was scathing of an airline borrowing this much money only to give it away.

"In our opinion this is highly irresponsible, given the industry already has a high degree of operational gearing, has a large amount of off-balance sheet debt in the form of leases and is vulnerable to rising oil prices," he said.

"And then when tough times hit, these companies go cap-in-hand to the government and/or shareholders to repair balance sheets at very depressed equity prices, resulting in severe value destruction."

Relying on accurate forecasts of something that's hard to forecast

There is always some risk when a stock is hyped up on a future assumption.

It's fair enough if the forecast is reasonable, but it could spell disaster if it's something that's hard to predict.

"We deliberately avoid businesses that rely on us correctly forecasting commodity prices, interest rates, elections, drug discoveries, economic growth or political outcomes," said Desmond.

"Experience has taught us that very few people are able to do this on a consistent basis."

For example, he recalled back in 2016 very few investors expected Donald Trump to win the US presidential election.

"And for those who did, how many predicted that markets would rally?" Desmond said.

"Or in March of this year, who would have thought the market would be at an all-time high in December, when the global economic contraction has been the largest since the Great Depression?"

No moat

A proper competitive advantage is a basic investment axiom. But it can get lost in the fervour of a bull market.

"Superior returns on capital normally arise from some form of competitive advantage – be it a brand, network effect, scale, reputation, data, client relationships, IP or technology," Desmond said.

"Over time, competition does a pretty good job of taking away excess returns for most businesses. And over time, it is very hard for an investor to earn a return much different than the underlying economics of the business one owns."

Poor management burning through cash

Terrible business decisions can cost even the biggest of companies dearly.

Desmond takes the example of General Electric Company (NYSE: GE). It was for many decades an industrial giant, but then started diversifying into finance, real estate, insurance and media.

"The end result was to take a AAA rated balance sheet and turn it into one that is now barely above junk status."

GE shares sold for about US$57 in the year 2000, but now trades for US$10.56.

In Australia, Desmond cites Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES)'s very expensive diversification attempts a few years ago.

"Who can forget Woolworths' ill-timed home improvement venture against the toughest of competitors, or even Bunnings themselves and their venture into the UK?" he said.

"Would it not have made sense to focus capital on the competitive advantage that made the company a market leader in the first place and then return excess capital to shareholders?"

Expensive share price

Buying shares cheaply sounds obvious. But again, in a mad 'fear of missing out' scramble, human nature can easily ignore 'fair value'.

"Even the most disciplined can be lured into paying inflated prices, especially in the upper reaches of a bull market," Desmond said.

"The narrative always follows a similar pattern that excess growth will last forever, interest rates will never rise, the company has changed (very few do), the company deserves a lower beta and the list goes on."

The post 5 ways to lose your money forever appeared first on The Motley Fool Australia.

In a world where share markets increasingly ignore traditional financial metrics to figure out the worth of companies, brand value has never been more important.

But even a quality as ethereal as brand value can be measured.

Each year, United States consultancy, Interbrand, publishes a list of the top 100 brands in the world.

Clare Capital analyst, Robin Basra, said the rankings are calculated as a combination of three attributes – financial forecasts, the role of the brand and the strength of consumer preference for the brand.

And the world has dramatically shifted to technology over the past 10 years.

"A decade ago, Coca-Cola Co (NYSE: KO), IBM (NYSE: IBM), Microsoft Corporation (NASDAQ: MSFT), Google (Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)) and General Electric Company (NYSE: GE) represented the most valuable brands in the world," said Basra.

"In 2020, Google and Microsoft retain their positions, Apple Inc (NASDAQ: AAPL) has replaced IBM as the most valuable technology brand, and the others have fallen lower down the order – signalling changing dynamics and consumer preferences."

Another nod to the way the globe is shifting is that a non-American company, Samsung Electronics Co Ltd (KRX: 005930), snuck in at fifth place.

Valuable brands outperform rest of share market

This brand value thing matters on the stock market. 

In a year when most publicly listed companies were hammered by COVID-19, the share prices of the five most valuable brands were up 54% on average.

Even when generalised out to the 100 most valuable brands, their collective share price has outperformed the S&P 500 Index (SP: .INX) by more than double.

Most valuable brands by sector

The brand leaders for each sector have also shown healthy share price growth. 

The exception is Toyota Motor Corp (TYO: 7203), which perhaps isn't surprising considering the economic downturn.

The post What COVID-19? World's 5 most valuable brands are up 54% appeared first on The Motley Fool Australia.

The Nanosonics Ltd. (ASX: NAN) share price closed Monday's trading session at an all-time high of $5.36. Nanosonics is among the top 10 gainers for the S&P/ASX 200 (INDEXASX: XJO) index, with its share price soaring more than 80% in 2019. A sticky business model, growing market, and product innovation could see Nanosonics well poised for future growth and perhaps become Australia's next healthcare blue chip.

Blue-chip potential

CSL Limited (ASX: CSL) and Cochlear Limited (ASX: COH) are heralded among long term investors as two of the most rewarding companies on the ASX. Both companies have provided sustainable long-term growth and continued innovation has seen them become global leaders in their respective fields. As a supplier of sterilisation equipment to hospitals, Nanosonics shares similar characteristics to the two healthcare giants and could potentially follow in their footsteps.

Nanosonics was founded in 2000 and is a global provider of sterilisation devices to hospitals and healthcare centres. The company's flagship Trophon device sterilises ultrasound probes without the use of chemicals and sells for more than $10,000. The Nanosonics business model also generates revenue from its 'consumable' components which are patented, protecting Nanosonics from being undercut by competitors. Many investors and analysts have high hopes for Nanosonics, given the company's sticky business model, dual revenue streams, and large addressable market.

Solid results

Earlier this year, Nanosonics delivered a strong half-year report, highlighted by a 221% increase in net profit of $7.1 million and record first-half sales revenue of $40.7 million. Sales of Trophon devices increased 11% and contributed $16.4 million to revenue, while recurring consumables and services were up 59%, generating $24.3 million in revenue.

Fundamentally, Nanosonics looks in good financial health with an expected earnings growth of 48% and a 64% revenue growth, indicating that earnings are driven by high-margin products. The cash balance of Nanosonics grew to $71.3 million in the first half, indicating excellent debt management and opening the potential for further research and product development.

Global and product expansion

Like Cochlear's hearing implants, Nanosonics products are sticky in the sense that hospitals and healthcare centres are unlikely to stop using the devices once they are installed. A lucrative sales agreement with the General Electric Company (NYSE: GE) has allowed Nanosonics to gain 40% of the market share in the United States. Nanosonics aims to develop a global growth strategy as more markets develop, with the company already identifying Europe and Japan as the next regions of growth.  

In addition to further expansion, Nanosonics also intends to dominate the infection prevention sector by investing heavily in research and development. The company looks to grow its product pipeline to address infection prevention not only in hospital settings, but also in dentistry and aged care facilities. Nanosonics aims to develop products that not only kill bacteria, but also collect data that ensures traceability and compliance of infection control standards

Foolish takeaway

As a company with a $1.3 billion market capitalisation and profits less than $10 million, Nanosonics is a long way from the likes of CSL and Cochlear. However, it does share similar characteristics, which could see the company develop into something special.

With its chief executive being the former vice president of global marketing at Cochlear, Nanosonics is poised to execute its global strategy. Equipped with strong fundamentals and a business model that fuels recurring revenue, Nanosonics can take advantage of its market opportunity by continuing research and development to further enhance its product pipeline.

The post Is Nanosonics the next ASX healthcare blue-chip? appeared first on The Motley Fool Australia.

And despite Ferrari being nominated as the world's most powerful brand, it ranks 350th in the world with a value of US$4 billion. CEO of Brand Finance, David Haigh says the Italian car maker's mix of desirability, loyalty and consumer sentiment give the company an indisputable brand power.

The top 10 most valuable brands list is dominated by tech companies, with most domiciled in the US.

So without further ado, here's the list of companies, country and their estimated brand value, in US$.

Source: Brand Finance

The top 4 have retained their positions from 2013. Big movers up include, Verizon, GE and AT&T, while Walmart, IBM and Coca-Cola all slumped. Coca-Cola came in at number 12 this year, after holding down ninth last year.

The post The world's top 10 most valuable brands appeared first on The Motley Fool Australia.