So is Exxon or Apple a better value? It's hard to say, since the comparison is (pardon the pun) apples to oranges. But neither looks expensive.
Cash and debt: Advantage Apple
Exxon is one of the strongest borrowers on Wall Street, with the elite AAA rating from Standard & Poor's. That's because it holds only $16.7 billion in total debt backed up by $323 billion in assets. Exxon has $11 billion in cash and short-term investments, and $35.3 billion in long-term investments. Impressive, right?
Well, consider this: Apple has zero debt, with a staggering $30.1 billion in cash and an additional $67.4 billion in long-term investments.
Exxon may get great rates on its corporate bonds, but Apple is in the enviable position of never needing to borrow a dime because of its massive bank account.
Brand power: Advantage Apple
How does Exxon make money? By exploring for oil, refining it and selling gasoline (among other products). It's a big business, because energy is the lifeblood of the global economy. However, many consumers get sick and tired of feeling the pain at the pump, and they blame Big Oil when gasoline prices rise. Throw in talk about fossil fuels contributing to global warming, and it's apparent why Exxon won't win a popularity contest on Main Street.
Contrast that to Apple, which sees long lines of customers eager to buy as soon as each new iPhone launches. People can't wait to give the company their money.
Apple isn't without bad press, of course -- the fact that it gets filthy rich from cheap Chinese labor doesn't sit well with some. But by and large, Apple is a much more powerful brand than Exxon. Gasoline is a necessity. The iPhone is gadget that everyone covets.
Share momentum: Advantage Apple
Here's where we get to what investors really want to know: What will Apple or Exxon stock do for their portfolio?
Exxon stock hasn't held a candle to Apple over the past few years. Exxon did manage an impressive 50% gain from its 2010 low to its spring 2011 peak, outperforming Apple's 35% gain in the same period. But other than that period, Apple has trounced Exxon.
So far in 2012, Apple is up 24%, while Exxon is flat. Over the past 12 months, Apple has risen 41%, while Exxon has gained 2%. In the past five years, Apple is up 504% to Exxon's 12%. Past performance doesn't guarantee future returns, but the disparity here is dramatic.
Frankly, the discussion over whether Apple or Exxon is bigger is a waste of time. Market capitalization doesn't reflect the fact that Exxon remains a significantly larger company measured by revenue or profits.
And fundamentally, the real question for investors has nothing to do with size. Plenty of small stocks are red-hot buys, and plenty of big companies are duds. The challenge is finding a company that's on the way up, expanding its sales and profits.
Apple has that growth. It also has a great brand, a stock with a history of outperformance and a valuation that suggests the stock is a bargain.
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None of these measures matter. Who cares what the revenue growth of s stock is if it doesn't reward you? The most important question is, "Will investing in this stock pay off?"
AAPL is up over 40% for the year XOM is flat. Even with dividends it can't come close. Go to 3 years and AAPL is over 400% while XOM is around 12%. The S&P index beats that. Game over. AAPL wins hands down. And don't pull that past performance is not indicative of future returns b.s...
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