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I puzzled over the curious case of the missing ginger ale this summer.

The hot weather had prompted a pop order from Amazon to aid in the consumption of rye whisky. But my thirst went unquenched when case after case of ginger ale was apparently lost in transit.

I fancifully thought the ale might have been waylaid by pirates who quaffed the stuff en route. But the likely cause appeared when a case of bubbly finally turned up. Six of the 12 cans arrived in an alarmingly bloated and bulging state. They seemed to be on the verge of exploding.

Alas, the missing cases may have burst and given an unfortunate soul a syrupy soaking.

Thus I gave up on ordering ginger ale from Amazon, but otherwise enjoy their service. I also have misgivings when it comes to the shares of Amazon and many other high-tech giants because they appear to be a bit bubbly at this point.

I like to check on base rates when thinking about returns, and the largest companies in the United States have historically not fared well over the long term. For instance, money manager Rob Arnott looked at the performance for investors who bought the largest stock in the U.S. and held on for a decade. They underperformed an equally weighted index of U.S. stocks by an average of 5.4 percentage points a year, based on data from 1952 to 2011.

Apple Inc. is currently the largest stock in U.S. but Inc. vies with Microsoft Corp. for the second and third spots, depending on the day. All of them have fared unusually well in recent years.

Problem is, giant companies have a hard time growing significantly. Compounding matters, growth that is slow, or slowing, can be a real issue when stocks trade at high multiples.

The scale of the issue is shown in the accompanying table. It includes the largest 10 firms by market capitalization in the U.S. along with their trailing 12-month revenues, net incomes and cash flows from operations, based on data from S&P Capital IQ in U.S. dollar terms. Also shown are the firm’s trailing 12-month and forward 12-month earnings multiples.

Top 10 U.S. stocks

CompanyTickerMkt. Cap. (US$ Bil.)Rev. TTM (US$ Bil.)Net Income TTM (US$ Bil.)Cash from Ops. TTM (US$ Bil.)P/E TTMFwd. P/E TTM
Berkshire HathawayBRK-B-N50625022392323
Tesla TSLA-Q4182603NM159
Johnson & JohnsonJNJ-N388811721*2317

Source: Norman Rothery

S&P Capital IQ. Data as of Oct. 15. * Second-quarter TTM. TTM = trailing 12 months. NM = not meaningful.

Apple would have to double its revenues from US$274-billion to US$548-billion to double its earnings, provided its net income margin remained unchanged. Selling an extra US$274-billion worth of stuff is daunting because it would represent about half of Walmart Inc.’s annual sales.

Despite the challenge, the market expects a good deal of growth from Apple because it is trading at 37 times trailing earnings and 33 times forward earnings.

Apple is probably not going get the new sales by duplicating Walmart’s high-volume low-margin approach. The most obvious tactic is to go after the sales of other high-tech firms such as Amazon, Microsoft and Google parent Alphabet Inc. But those companies are looking to grab some of Apple’s customers for themselves.

I also wonder if today’s big tech firms will be able to avoid the fate of the Radio Corporation of America. It ruled the roost in the heyday of radio but failed to keep up with the times and eventually faded.

Much like radios, smartphones run the risk of being commoditized over the long term. In my view, the relative benefits of buying the latest iPhone aren’t nearly as strong as they once were.

Of the 10 stocks, Tesla Inc. appears to be particularly bubbly. It trades near 16 times revenues, 155 times cash flow and 159 times forward earnings estimates. The car company’s shares seem to have shot well ahead of its fundamentals. After all, the firm’s market capitalization is near that of Walmart but Walmart’s cash flow from operations exceeded Tesla’s revenues over the past year.

I worry that many of the largest stocks in the U.S. offer the equivalent of bulging cans of ginger ale to investors and some of them might spring a leak. But I don’t think the companies themselves are going away any time soon.

Norman Rothery, PhD, CFA, is the founder of

Full disclosure: The author owns shares in BRK.B, which has a large stake in AAPL.

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