Just yesterday, Fortune Magazine released this year’s Fortune 500—the infamous yearly list that ranks America’s largest public corporations by annual revenue. As I mentioned yesterday, there were some surprises on this year’s list (including the introduction of newcomer Facebook), and lately that has been all that everyone can talk about.
But this year I decided look at this list in a slightly different light—specifically, by running the Top 10 finalists through Portfolio Grader, my stock screening tool. And while all but two of these stocks have gapped up following the announcement, I’ve uncovered that money can’t buy everything.
While a strong revenue stream may ensure a spot in the Fortune 10, it doesn’t necessarily mean that the stock gets the green light from me: While four on this list are buys, four are holds and the other two are outright sells. That’s because in addition to measuring sales growth, I analyzed seven other fundamental metrics, including earnings growth, cash flow and return on equity. Together, these metrics make up my Fundamental Grade. On top of this, I measured the current level of institutional buying pressure as a means to determine each stock’s risk-to-reward ratio. This is distilled in my Quantitative Grade. From there, I weighted each stock’s Fundamental Grade and Quantitative Grade to determine my final “Total Grade:”
Continue reading to see my take on each of the Fortune 10.
Even though it started as a mom-and-pop operation in 1962, Wal-Mart Stores Inc. (WMT) has since grown into the largest public corporation by revenue. Although it is best known for its Wal-Mart brand name, Wal-Mart Stores Inc. is actually responsible for 55 brands of discount department stores across 15 countries. Wal-Mart has the largest private workforce in the world; it employs over 2.2 million individuals across almost 9,000 locations worldwide. WMT is an A-rated Strong Buy.
While Exxon Mobil (XOM) as we know it has only been around since 1999, its roots stretch all the way back to 1870 when John D. Rockefeller founded Standard Oil, the world’s largest oil refiner at the time. Today, Exxon Mobil still holds that distinction, but has since diversified into other businesses, including chemicals, information technology, real estate and gas and power. In the next five years, the company plans on investing about $37 billion to help meet global demand for energy. XOM is a D-rated Sell.
At the consumer level, Chevron Corp. (CVX) is most known for its gas stations, but the company is involved in a range of energy plays. First, the company creates about 2.76 million barrels of oil per day for distribution across six continents. Chevron has most of its retail stations in the United States, western Canada and Pakistan. The company also runs the Texaco brand. In addition, Chevron also has a lubricants business, aimed at industrial and marine clients worldwide. Finally, the company runs a Pipe Line business that transports oil, natural gas, CO2 and other refined products throughout the United States. CVX is a C-rated Hold.
#4: Phillips 66
The Phillips 66 (PSX) brand has been around since 1917, when brothers Frank and Lee Eldas Phillips started a small town petroleum company. Today, the Phillips 66 name encompasses 15 refineries (with net crude oil capacity of 2.2 million barrels per day), 10,000 marketing outlets and 15,000 miles of pipeline. On top of this, the company holds a 50% interest in DCP Midstream and a 50% stake in Chevron Phillips Company. Phillips 66 used to operate under ConocoPhillips Co. (COP) but was spun off as a separate company in 2012. PSX is an A-rated Strong Buy.
#5: Berkshire Hathaway
With Warren Buffett at the helm as chairman, President and CEO, Berkshire Hathaway (BRK.B) is perhaps the America’s best-known conglomerate holding company. Based in Omaha, Nebraska, Berkshire Hathaway wholly owns household names GEICO, Dairy Queen, Fruit of the Loom, and Helzberg Diamonds, among others. And that’s not even mentioning the company’s significant stake in big public brands like Heinz Co. (HNZ), American Express (AXP) and The Coca-Cola Company (KO). BRK.B is a B-rated Buy.
From tablets to smartphones to mp3 players, Apple Inc. (AAPL) has made its mission to put the "i" in consumer electronics. The company’s iPod and iTunes lead the digital music industry, and the iPhone is one of the hottest smartphones out there. AAPL also hasn’t forgotten its personal computing roots and has cut into the dominance of Windows with its OS X operating system and fleet of Mac computers. AAPL is an F-rated Strong Sell.
#7: General Motors
Once a global institution, General Motors (GM) is an American carmaker whose roots stem back to 1908. General Motors is behind household car names like Cadillac, Chevrolet and GMC in the United States as well as Opel and Vauxhall in Europe. Currently, the company employs just over 210,000 worldwide and operates in just under 160 countries. GM is a C-rated hold.
#8: General Electric
For the past 125 years, General Electric (GE) has been a company that has exemplified American ingenuity. Throughout the years, this company has been responsible for inventing the fluorescent lamp, the dishwasher, the toaster oven, the MRI and the first U.S. jet engine. However, even though General Electric is best known for its consumer electronics and appliances as well as industrial machinery, the company also has businesses branching into media, healthcare, transportation and finance. GE is a C-rated Hold.
#9: Valero Energy
Based in San Antonio, Texas, Valero Energy (VLO) is a major manufacturer and marketer of transportation fuels, petrochemical products and power. Among the 16 refineries it operates throughout the U.S., Canada, the U.K. and the Caribbean, Valero produces in the neighborhood of 3 million barrels of fuel per day. On top of this, the company operates 10 ethanol plants and a 50 megawatt wind farm. But what many consumers know Valero for is its namesake line of gas stations and its Corner Store convenience stores. However, that is soon about to change. Just recently, the company’s CST Brands, which includes the Corner Store line, announced that it has spun-off from Valero Energy. So effective immediately, Valero is going to move away from retail and focus on it fuel manufacturing and marketing businesses. VLO is an A-rated Buy.
#10: Ford Motors
Ford Motor Co. (F) is the quintessential story of American ingenuity. At the turn of the 20th century, Henry Ford perfected the assembly line and introduced the Model T to the American economy. And, the rest, they say is history: Over a century later, Ford has grown to be the second largest automaker in the U.S. and the fifth largest in the world. In addition to its namesake brand, this company also sells luxury cars under the Lincoln name. F is a C-rated Hold.