Tip of the Market Cap

By: John A. Lanier

It’s also a big deal that BlackRock became a Global Partner of the Ellen MacArthur Foundation in October this year. In doing so, BlackRock signaled to the broader investment community, and to the entire corporate world, that it believes in creating the circular economy.

How do you measure a company? Well, lots of ways I suppose. Every line item on a balance sheet is a measurement. You’ve got environmental metrics like carbon and water footprints. There’s also the total number of employees, a company’s total years in existence, it’s price to earnings ratio, and on and on.

Let’s get more specific. How do you measure a company’s financial valuation? Technically, the answer here depends on a number of things as well, but let me offer the simplest method I can think of – market capitalization.

What’s that, you ask? Or maybe you didn’t, I don’t know - I’m going to explain it all the same. Market capitalization is a simple math equation: the total number of outstanding shares of stock in a company multiplied by the price per share. In other words, it tells you the amount you’d have to pay if you could buy all the shares of stock in a company all at once at the current stock price.

Market cap (as the cool kids call it) is an easy way to roughly compare the valuation of companies, and it also gives a sense of corporate scale in investment terms. Take, for instance, this Wikipedia listing of the largest companies by market cap. In looking at market cap as of the close of the third quarter in 2019, Microsoft led the way at $1.062 trillion. Apple was nipping at its heels with a $1.012 market cap, while Amazon and Alphabet (Google’s parent company) were hanging out in the $800 billion range. Berkshire Hathaway just barely edged out Facebook for fifth on the list, clocking in at just over $500 billion each. Collectively, these six companies had a market capitalization this past quarter of about $4.79 trillion.

Which, by comparison, makes the size of a company called BlackRock all the more impressive. You see, investment companies use another measurement to compare size – assets under management, or AUM. Essentially, AUM is how much money has been entrusted to a financial services company for investment. BlackRock just-so-happens to be the largest company in the world when measured by AUM. According to Wikipedia, they had $6.96 trillion in assets under management at Q3 close this year.

That means that BlackRock manages more money than the total valuation of Microsoft, Apple, Amazon, Alphabet, Berkshire Hathaway, and Facebook combined, with more than $2 trillion of room to spare. Read that sentence again…..BlackRock is a big friggin’ deal.

So it’s also a big deal that BlackRock became a Global Partner of the Ellen MacArthur Foundation in October this year. In doing so, BlackRock signaled to the broader investment community, and to the entire corporate world, that it believes in creating the circular economy. As the news release said, “The transition towards the circular economy is already happening, and now finance is vital to accelerate this shift.” In the finance world, no company is more impactful than BlackRock.

As we wrap up 2019 and look into the 2020s, I find myself particularly grateful for good environmental news. This is some of that good news, and I hope we begin to see the fruits of BlackRock’s partnership with the Ellen MacArthur Foundation sooner rather than later.

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