Heavy Weighs The Crown For Exxon

Todd Shriber
 
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One of the more interesting headlines that might get lost in the shuffle of what turned out to be a glorious Tuesday for beleaguered investors concerned the battle for market cap supremacy between Dow component Exxon Mobil, the largest U.S. oil company, and Nasdaq darling Apple. With a sharp bounce of almost 6% on better twice the average daily volume, Apple was a standout today.

Of course, the Dow is not going rally nearly 4% without the help of Exxon and the oil giant delivered a 2% pop on strong volume as well, but somewhere between 9:30AM and 4PM New York time, Apple enjoyed a brief stint as the largest company in the world by market value. When the dust settled on the trading day, Exxon had a market cap of $352.9 billion compared to $346.7 billion for Apple. In today's volatile, computer-driven trading environment, that difference can be widened or narrowed in the blink of an eye.

The reality is being the largest company in the world by market value is not much more than a feather in the cap of whatever company holds the title. Exxon CEO Rex Tillerson probably is not losing any sleep over his company's inevitable fate, which is that Apple will in fact pass Exxon for the top market cap spot. After all, Apple is not a direct competitor to Exxon (XOM).

The Apple/Exxon battle is actually a good segue to talking about another company that has ambitions of encroaching on Exxon's lofty market cap territory, that being Petrobras, Brazil's state-run oil giant. Forbes interviewed Petrobras CFO Almir Barbassa late last month regarding his company's goal of being bigger than Exxon by 2020, an ambition which also includes topping Apple (PBR) in market value.

The CFO made an accurate, yet pride-ridden quip saying ''I buy oil every day; iPads, you buy every couple of years.'' That is true. In the big scheme of the global economic stage, oil is and will always remain more important than tablet devices and smartphones. However, statements like smack a little bit of desperation from Petrobras (PBR), which by market value is only half the size of Exxon. Lest it be forgotten that Petrobras pays a paltry and has been outperformed by even BP in the past year.

Of course the matter of cash cannot be forgotten when it comes to Petrobras attempting to usurp Apple. Petrobras is adept at raising cash, as evidenced by the company's $70 billion share sale last year, the largest share offering ever. The company is also proficient at spending cash, a fact highlighted by the its $224.7 billion five-year spending plan. On the other hand, Apple is better at hoarding cash. The company has $76.4 billion in cash on hand. That is more than the U.S. government, the BBC reported last week.

I am not saying Petrobras will go this way because it will not, but there have been companies that have thrown out the ''We will be bigger than Exxon'' claim before. One of them was Enron. For now and the foreseeable future, Petrobras ought to stop worrying about Apple and Exxon and try pleasing its own investors.

Todd Shriber

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