As companies like Apple and Alphabet went from companies too small for an index fund to its top components, such that 6% of all S&P 500 index investing dollars go into these two companies alone, it has been an underappreciated benefit that these two companies have been immensely profitable, sitting on hundreds of billions of dollars in cash and earning tens of billions of dollars per year in cash profits, respectively. Even though the companies are “new” by historical standards regarding where they were twenty years ago, they have not introduced a systemic risk because the profits were there.
It appears that Uber and Lyft will have their initial public offering within the next year, based on filings, and there are introductory estimates that Uber’s valuation will be $120 billion.
What does this mean? Uber will certainly become a member of the S&P 500. For reference, the smallest company in … Read the rest of this article!