Trillion-dollar stocks are a rare breed.
At the moment, there are only six listed US companies that made the mark, namely Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA).
I count myself as fortunate to have owned five out of these six unconventional stocks.
My oldest holding is Apple, bought in 2010 or 14 years ago. More recently, I purchased shares of Microsoft in 2020, four years ago.
You can learn a great deal from holding stocks for years through to decades.
Here are five unconventional lessons that these behemoths can teach you.
1. Unthinkable: Thinking at the internet scale
Back in 2010, when I bought shares of Apple, the idea of a company reaching a trillion-dollar valuation sounded like science fiction.
It was unthinkable.
What changed?
For starters, Apple’s iPhone played a big part in increasing the internet’s population from less than two billion in 2010 to over 5.4 billion in 2023.
The world wide web has shattered the limitations of the past.
Suddenly, companies are no longer confined to local markets. Today, companies can reach billions of people, opening doors to a scale of business once thought to be impossible.
Take a look at the trillion-dollar club.
Apple boasts over 2.2 billion active devices worldwide, enabling the company to host well over a billion paid subscription services on its platform.
That’s a testament to its global audience.
It’s not just Apple.
Meta Platforms, the company behind Facebook, WhatsApp, and Instagram, connects over 3.2 billion people daily across its apps.
Not to be outdone, Alphabet, the tech giant behind Google search, Android, YouTube, and Chrome, has six products with a staggering two billion monthly users or more.
That’s the scale the internet enables.
This unprecedented access to consumers has translated into serious revenue. Over the past 12 months, Alphabet and Meta raked in over US$318 billion and US$142 billion in revenue, respectively.
2. Uncountable: Winners don’t need a five-page spreadsheet
Imagine being stuck on the sidelines, waiting for the perfect price to buy a stock.
That’s the trap some investors fall into, obsessed with pinpoint accuracy before pulling the trigger.
We get it — a price target feels safe, a clear line in the sand for buying and selling.
But here’s the reality check: predicting the future with perfect accuracy is impossible. An accurate valuation hinges on exactly that: seeing the future.
Need an example?
When I first bought Apple shares, its annual revenue was an impressive US$43 billion.
That’s impressive but here’s the kicker: three years later, that number skyrocketed to over US$156 billion. That’s more than triple the sales in just 36 months.
Let’s be honest, who saw that coming?
Not even the best analysts would be entering such figures into their spreadsheets.
Therein lies the lesson for investors: you can only project what you can imagine. Don’t get caught up in trying to predict every detail.
Putting in extra work here will not improve your investment results.
3. Unimaginable: Your original thesis will be wrong
Another investor obsession is the search for the perfect criteria for winning stocks.
Don’t get me wrong.
A good criterion is useful. It helps you separate the diamonds in the rough from the duds.
Here’s the twist: the reasons you buy a stock may not be the same reasons you hold it five years later.
Take Amazon for instance.
When I bought shares of the online retailer in 2010, I was getting just that: a thriving eCommerce business.
But if you buy its shares today, you will be getting a dominant online retailer (US$372 billion in revenue for 2023), a leading cloud computing provider (almost US$91 billion), a massive subscription business (over US$40 billion) and a growing advertising business (US$47 billion).
What’s more: the key profit drivers are the latter three businesses and not its eCommerce arm.
Amazon is not the only one.
All of five of the trillion-dollar companies in my portfolio have undergone business transformations over the past decade. And it’s a good thing — it shows that they found new paths of growth beyond where they started.
4. Unfathomable: The next Facebook is Facebook
The other investing myth is that small, obscure companies are the only path to big returns.
My experience in holding Meta’s stock over the past eight years proves otherwise.
When I purchased its stock, the business had generated US$18 billion in revenue for 2015, hardly a small company. Furthermore, Facebook had already attracted 1.6 billion monthly users worldwide, therefore, it was not flying under the radar.
As a reminder, the social media network currently pulls in over US$142 billion in annual sales, helping to lift shares up by almost five times above my buy price.
The lesson? Big companies can still grow.
Don’t get hung up over company sizes or whether you missed the boat. Instead, spend more time looking at what the business has done well in the past and whether it can continue doing so in the future.
It’s a better deal too.
You’re buying a business that has a track record of performing well, and not some unproven business which has yet to churn out a profit.
5. Unknowable: Surprising on the upside
When I bought shares of Microsoft four years ago, artificial intelligence (AI) was not a big part of my investment thesis.
Here’s a surprise: I’m not the only one who thought so.
Recent court filings revealed that Microsoft had themselves acknowledged, back in 2019, that it could not compete with the depth and scale of its rivals’ (Google and OpenAI) AI ambition.
These shortcomings led Microsoft to invest billions into OpenAI in a bid to narrow the gap.
With the benefit of hindsight, the move proved to be prescient.
OpenAI’s ChatGPT provided the spark that Microsoft and the AI industry needed. Today, demand for AI services is starting to contribute to Microsoft’s revenue growth.
Remember, I predicted none of the above.
And yet, my shares have more than doubled over the past four years or so, backed by free cash flow which has grown by over 60% over this period.
The sequence of events above shows that you don’t need to predict everything ahead of time to make money. If you bought a well-managed company, you’re better off leaving them alone to make the right decisions.
In my experience, they often do.
Note: An earlier version of this article appeared in The Business Times.
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Disclosure: Chin Hui Leong owns shares of Alphabet, Amazon, Apple, Microsoft, and Meta Platforms.
