What do the 10 biggest companies in the world have in common?

It’s a good question – and one that might give us some insights into what it takes for a company to have a truly global presence. After all, finding the ‘next Amazon.com’ or the ‘next Apple’ is the ultimate dream of most investors around the world.

So let’s take a look at what the 10 largest companies in the world actually are before we get started. I’m going off the iShares Global 100 ETF (ASX: IOO) here, which tracks the S&P Global 100 Index and excludes companies from ’emerging markets’ like China and Saudi Arabia. I think this is a good thing because although some companies from these kinds of countries are massive, it’s hard to truly assess them as they often have significant government ownership, which can distort their valuations.

So, using the IOO ETF as a proxy, here are the S&P Global 100 Index’s top 10 holdings:

1. Microsoft
2. Apple
3. Amazon.com
4. Alphabet
5. Johnson & Johnson
6. JPMorgan Chase & Co
7. Nestle
8. Procter & Gamble
9. Intel Corporation
10. Roche Holdings

So there you have it, the global top 10.

Now, what can we learn from these companies? Well, already I see some patterns. Half of this list are tech companies, and 8 out of 10 are American companies. Two are healthcare companies and two are consumer staples. And unlike the S&P/ASX 200 Index (ASX: XJO), there’s only one bank here.

But let’s dig a little deeper. I think it’s fair to say that all of these companies are the best in their fields at making products we all need to work and live. And they cement this advantage through powerful brands.

Everyone knows Microsoft’s Office and Windows products are unrivalled at what they do. And everyone knows how good Alphabet’s Google search engine is.

Apple may have its fair share of haters, but you can’t deny it’s one of the most powerful brands on the planet. Meanwhile, Nestle’s dominance in making foods and drinks permeates almost every country in the world.

You get the idea. All of these companies have gotten to where they are by doing what they do better than their competitors and distilling that advantage through brand power.

In my view, that’s the kind of quality that makes a life-changing investment.

How we can apply these lessons to ASX shares

So how do we apply these lessons to our own ASX? Well, there are a few shares that I think are following this path in a very promising manner.

Xero Limited (ASX: XRO) is one. It’s building a great brand across the world through its unique accounting software. The number of customers using Xero’s products increased 26% in FY19 and by double-digits in each of its target markets.

Afterpay Ltd (ASX: APT) is another. It has managed to go from a niche Australian brand to a truly global player in the payments space in just a few years.

CSL Limited (ASX: CSL) has already become one of the world leaders in the blood and plasma medicines and vaccinations space. I think it has the potential to climb even further.

Finding your own Amazon is hard – but you can always look for the telltale signs and invest accordingly. Who knows, you might have some mean bragging rights in the future!

More reading

• Why is it so hard to outperform the ASX 200 index?
• ASX 200 closes higher, banks keep rising
• 3 tips for surviving an ASX recession
• CSL share price lower despite COVID-19 vaccine news
• Why Alumina and Stockland share prices could outperform in coming weeks

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Procter & Gamble and JPMorgan Chase. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, CSL Ltd., and Xero. The Motley Fool Australia has recommended Alphabet (A shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post What the 10 largest companies in the world have in common appeared first on Motley Fool Australia.

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Despite what almost every fund manager in the country will tell you, it’s hard to outperform the S&P/ASX 200 Index (ASX: XJO).

That’s why most active fund managers, despite the handsome management fees and salaries they attract, struggle to beat the market over a long period of time.

And what’s more, those that do manage it in a given year will most likely not manage it again the year after.

According to reporting in the Australian Financial Review (AFR), 87% of fund managers failed to beat the ASX 200 in performance in 2018. That’s a staggering statistic.

Of course, a large part of this underperformance comes down to fees. An ASX 200 index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) typically charges minuscule management fees (0.09% per annum in IOZ’s case). In contrast, it’s not uncommon for a managed fund to charge a management fee 10 or 20 times that.

If a managed fund has a fee of 1.5%, it needs to beat the market by 1.5% every year just to break even for you. That’s a tall order and (according to the AFR) one most managed funds don’t measure up to.

Is it possible to beat the ASX 200 index?

Beating the index is challenging because of how efficiently the index operates. It buys more of rising companies and kicks the underperformers out.

Just think of CSL Limited (ASX: CSL). CSL is the largest share on the ASX 200 with a share price of $286.66 (at the time of writing) and an ASX 200 weighting of around 8.2%. But 5 years ago, this was a $90 stock. As CSL climbed, an ASX 200 index fund would have been continually adding to CSL’s position – in other words, buying into a winner.

And without any of its investors lifting a finger. The process is automatic, with no room for human error. It’s this simplicity that makes index funds so formidable.

Now, we Fools think it is possible for ordinary investors to outperform the index. Not paying usurious fees to fund managers is one place to start.

But on top of this, you have to do a lot of research and work, find companies that are real winners and buy them at great prices – preferably when no one else wants to touch them. That’s partly how the great Warren Buffett managed to beat the market over multiple decades.

Beating the market is tough. But it is possible, and it’s also a highly lucrative pathway to wealth creation if you can find it and stay on it.

And if you decide it’s a path you don’t want to tread, there’s nothing wrong with sticking with an index fund either!

More reading

• What the 10 largest companies in the world have in common
• ASX 200 closes higher, banks keep rising
• 3 tips for surviving an ASX recession
• CSL share price lower despite COVID-19 vaccine news
• Why Alumina and Stockland share prices could outperform in coming weeks

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why is it so hard to outperform the ASX 200 index? appeared first on Motley Fool Australia.

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If you’re looking for some quality ASX dividend shares to buy, then the three listed below tick a lot of boxes for me.

I think they are among the best on offer for income investors right now. Here’s why:

Commonwealth Bank of Australia (ASX: CBA)

The first ASX dividend share to consider buying is Commonwealth Bank. I think the big four banks were severely oversold during the pandemic and, although they have recovered strongly over the last few weeks, I still think they are undervalued. My preference in the sector remains Commonwealth Bank due to the overall quality of its business. Next year I expect the company to cut its dividend to ~$3.70 per share. If this proves accurate it will mean a fully franked 5.4% FY 2021 yield.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue Metals could be a great dividend share to own if you don’t mind investing in the resources sector. It looks well-positioned to deliver strong profit results in FY 2020 and FY 2021 thanks to sky high iron ore prices, improving production grades, and its low cost operations. And with the iron ore producer’s balance sheet looking strong, I suspect the majority of its free cash flow will be returned to shareholders. I expect this to lead to a fully franked dividend of at least 6% in FY 2021.

Telstra Corporation Ltd (ASX: TLS)

A third dividend share to consider buying is Telstra. The telco giant is one of my favourite income options right now due to its attractive valuation, generous yield, and positive outlook. The latter is thanks to the NBN headwind beginning to ease and its significant cost cutting. Combined, I believe Telstra could return to growth in the coming years. But thankfully, until then I believe it dividend is sustainable at 16 cents per share. This equates to a fully franked 5% dividend yield.

More reading

• ASX 200 closes higher, banks keep rising
• Here’s why I think CBA shares are a good buy today
• Ready to invest your first $2,000 in ASX shares? Do these 3 things first
• 2 ASX growth shares I’d buy before Afterpay shares
• Top broker tips the Vocus share price to zoom higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post These quality ASX dividend shares have very juicy yields appeared first on Motley Fool Australia.

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