Fortune Global 500

The Fortune Global 500 is an annual ranking of the top 500 corporations worldwide as measured by their total revenue. Published by the prestigious Fortune magazine, this list provides a yearly snapshot of the world's largest and most powerful business empires. It's the global edition of the more famous, U.S.-centric Fortune 500 list. While the American version focuses solely on companies based in the United States, the Global 500 canvases the entire planet, offering a fascinating glimpse into the shifting tides of international economic power. Companies from every conceivable sector, from colossal oil and gas producers and retail behemoths to tech titans and automotive giants, populate the list. For investors, it serves as a “who's who” of global business. However, as any seasoned value investor knows, being the biggest is a far cry from being the best investment. The list is a measure of sheer scale, not necessarily of quality, profitability, or shareholder value.

The methodology behind the Fortune Global 500 is straightforward, which is both a strength and a weakness. It relies on a single, clear-cut metric.

To make the list, it's all about one thing: revenue. Fortune ranks companies based on their total revenues for their respective fiscal years that ended on or before March 31 of that year. This simplicity makes the list easy to understand but can also be misleading. It means the ranking heavily favors industries with inherently high revenues but often razor-thin profit margins. For example, a massive retailer like Walmart or an energy company like Shell will almost always sit near the top due to their enormous sales volume. In contrast, a highly profitable software or pharmaceutical company with much healthier margins but lower total sales might rank significantly lower or not appear at all. An investor focused on profitability and efficiency might find the list's priorities misaligned with their own.

The composition of the list is a powerful indicator of global economic trends. For decades, it was dominated by American, European, and Japanese corporations. However, in the 21st century, there has been a dramatic and undeniable shift. The rise of Chinese state-owned enterprises and private companies has reshaped the top tiers of the list, reflecting the country's meteoric economic ascent. Watching which countries and industries gain or lose representation year after year provides a big-picture view of where the world's commercial gravity is shifting.

For a value investor, the Fortune Global 500 is a tool—a potentially useful one, but one that must be handled with care and a healthy dose of skepticism.

This is the golden rule. A company can have colossal revenues but be a terrible investment. It might be groaning under a mountain of debt, suffering from terrible management, facing declining prospects, or simply have a stock price that is wildly overvalued. A value investing approach demands that you look past the headline revenue number and dig into the nitty-gritty of the financial statements. What matters is a company's long-term earning power, the strength of its balance sheet, its return on equity, and whether it generates consistent free cash flow.

It's tempting to look at these corporate titans and think they are invincible. This is a dangerous assumption. History is littered with the corpses of giant companies that failed to adapt and were overtaken by smaller, more nimble competitors. Size can sometimes create a powerful moat, or competitive advantage, through economies of scale. But it can also lead to bureaucracy, complacency, and a chronic inability to innovate—a condition known as “diworsification,” where a company expands into too many unrelated areas and destroys value. No company is too big to fail or too big to make a dreadful investment.

The best way to use the Fortune Global 500 is as a hunting ground. It's a pre-screened list of the world's most significant businesses. A smart investor might scan the list for dominant companies and then ask the crucial question: “Is this great company currently on sale?” Market panics, industry-wide downturns, or temporary setbacks can sometimes cause the stock of a fantastic global leader to trade at a price well below its intrinsic value. That is the moment a value investor gets interested. The list gives you the names; your job is to do the hard work of valuation and wait patiently for the right price.

• The Fortune Global 500 is a ranking of the world's 500 largest companies based purely on total revenue, not on profit, assets, or market capitalization.
• It serves as an excellent barometer of global economic trends, particularly the rise and fall of national economies and key industries.
• For a value investor, size is not a reliable indicator of investment quality. Profitability, financial health, and a reasonable valuation are far more important.
• Use the list as a source of research ideas for globally dominant companies, but never buy a stock based on its rank alone. Always do your own homework.