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Charlie Bilello pointed out that the combined market capitalisation of Apple and Microsoft ($4.7 trillion) was $2 trillion bigger than the whole Russell 2000 ($2.7 trillion). The Russell 2000 is a small cap index made up of 2000 of the lesser stocks listed in the US.
What's even more fascinating is comparing the combined revenue and profits of Apple and Microsoft to all the stocks in the Russell 2000. Apple and Microsoft had combined revenues of $591 billion last year. The small caps had much more than that with $2.5 trillion.
However, Apple and Microsoft had combined profits of $163 billion versus $54 billion for the small caps. Which is why their valuations are so much higher. They are much more profitable.
What are the key take aways here? I can think of two. 1) Big tech is very profitable. 2) It is easier to be profitable when you are big. Easy access to capital, large moats around established businesses and ability to attract the best talent are all very useful.
