Watching stocks go up and down might make you wonder: How high can a stock go? Berkshire Hathaway (BRK.A) - Get Report is the most expensive stock of all time in terms of its price per share. The A-class shares at one point traded for more than $300,000 per share prior to the coronavirus market downturn.
The Most Expensive Share Price
The shares hit an all-time high of $347,400 per share in early 2020 before falling back to a recent close of $240,000 on March 23, 2020 in the wake of the market drop due to the coronavirus. World famous investor Warren Buffet is the chairman and CEO of Berkshire Hathaway.
An expensive share price isn’t necessarily a good thing and does not denote any measure of value. Over the years, Berkshire Hathaway has been recognized as a very solid, well-run company. It’s returns over time have rewarded long-term investors handsomely. But at the same time, the A-share class is out of reach for most individual investors. Berkshire does have a B-share class as well, the recent price per share was just over $162.
- Pendrell Corp. Class A whose industry is listed as Specialty Business Services. The closing price was $153,000 per share.
- Bactolac Pharmaceutical, Inc. whose industry is listed as Packaged Foods. The closing price was $120,000 per share.
Likely, most people haven't heard of these companies. In the list of stocks in the Morningstar data base sorted by share price, the most recognizable company was Amazon.com, Inc. listed at No. 54 on the list with a closing share price of $1,902.83.
A better indication of the total value of a stock is market capitalization. This is calculated by multiplying the share price at any point in time by the total number of shares of the stock outstanding in the marketplace.
By this measure, again using data from Morningstar, Berkshire Hathaway ranks as the 10th-largest stock with a market cap of about $391.9 billion. Microsoft (MSFT) - Get Report is currently the largest U.S.-listed stock in terms of market capitalization. As of this writing, Microsoft was the only U.S. stock with a market cap in excess of $1 trillion; it was more than $1.034 trillion at the market’s close on March 23, 2020. The top five in terms of market cap as of this date were:
- Alphabet, Inc (GOOGL) - Get Report the parent of Google traded in two share classes at a market cap of $725.334 billion.
- Alibaba Group LTD Holding ADR (ticker BABA) at $470.189 billion.
Other stock names with large market caps include:
- ExxonMobil (XOM) - Get Report, a major integrated oil company, has seen its market cap fall to about $144 billion, a significant drop as its price per share has declined by about 50% since the start of 2020, accelerated by the drop in oil prices and the market fallout from the coronavirus. At one point they would have been near the top of the list in terms of being one of the largest U.S. stocks in terms of market cap. They currently are No. 59 according to the Morningstar data.
Implications for Mutual Funds and ETFs
Many popular stock market benchmarks are market cap weighted. A prime example is the S&P 500 index. This index is populated with the 500 largest U.S. stocks weighted by their relative market cap. For example, the SPDR® S&P 500 ETF Trust (SPY) is the largest ETF that tracks the S&P 500 index. Looking at the fund’s recent holdings, the top 10 holdings comprised just over 26% of the fund’s portfolio. Microsoft, Apple and Amazon comprised just under 15% of the portfolio.
This means that these top holdings based on market cap will have an undue influence on the performance of the ETF, both good and bad.
Market Capitalization and Asset Classes
Market capitalization is a key factor in the asset classes and categories that stocks are grouped into. This has a major impact on mutual funds and ETFs. This can also impact the ownership of certain stocks by institutional investors.
Morningstar uses the following definitions for market cap:
- Domestic large cap stocks are those that generally comprise the top 70% of U.S. stocks by market capitalization. These stocks generally have a market cap in excess of $8 billion.
- Domestic mid-cap stocks generally make up about 20% of U.S. stocks by market cap. The range of market capitalization is generally from $1 billion to $8 billion.
- Domestic small caps are those in the bottom 10% in terms of U.S. market capitalization.
Large cap stocks are generally companies that have one or more established lines of business, likely have built out infrastructure in terms of the manufacturing of any product they sell or service they deliver and often have a solid financial infrastructure. They often have a solid balance sheet. Many large cap stocks are household names to both investors and consumers. This doesn’t mean, however, that large cap stocks can’t encounter financial difficulties.
Mid-cap stocks are in the middle between large caps and small caps. In many cases these are companies that have grown from their start-up stage into a more developed business, perhaps with multiple business units or product lines. Their financial structure is usually a bit more developed at this stage as well.
Small caps are smaller companies, many at the start-up stage. They often have only one product or service line and may not be well-capitalized. This companies can offer investors high potential returns, but also can carry larger risks as well.