Do you invest like your ancestors?

A lot has changed in the last 100 years. Most households didn’t have telephones wired in, a far cry from our mobile and data-dependent lives today. Televisions were certainly not an option, given very few homes had indoor plumbing or electricity. And, of course, households did not have access to antibiotics and other valuable aspects of modern medicine.

Life has certainly changed – and with it, you would assume, the types of companies we invest in. Surely it stands to reason that the biggest companies of the past would be a far cry from the giants of today, like the Magnificent Seven?

But what if that isn’t completely accurate and some of the stalwarts of the past are still portfolio darlings?

In this wire, we take a walk down memory lane to compare the past with the present. I also looked at broker and fund manager views to ask if you’d still invest today – and the answers may surprise you.

For the sake of ease, I’ve used the Reserve Bank’s Research Discussion Paper: A history of Australian Equities as my source for the biggest companies of the past, and Market Index for details of today.

Largest listed companies by market capitalisation 1917 v 2024

Source: Reserve Bank, Market Index as at 11 September 2024. 

History never repeats, but it often rhymes

Some interesting things to note – banks never go out of fashion if the above lists are something to go by.

The older list is also more familiar than you might expect, once you take out two companies that no longer exist and British American Tobacco's ASX delisting in May 2001. Here’s how you might know these businesses today (this also factors where they were purchased by or combined into businesses).

Arguably, not much has changed.

The top 10 of today sees the addition of four companies that didn’t exist in 1917 (CSL, Macquarie, Goodman Group and Fortescue), along with one that was a government entity up until 1991 – Commonwealth Bank of Australia.

It’s also an interesting demonstration of how our priorities and needs have shifted or remained consistent – we continue to need banks, mining resources and consumer goods, but today we also benefit from medical advances and a globalised world has created a growing need for industrial and digital infrastructure.

What the brokers think of the top 10 today

If the Market Index Broker consensus tool is anything to go by, the top 10 are out of favour. In fact, only 20% of the list ranks as a BUY, while 2/3 of the list is a SELL.

The fact that the Big Four banks fall under the SELL category should come as no surprise. Brokers have argued that valuations are stretched and yields declining – Commonwealth Bank, for example, is the most expensive bank in the world. The banks remain popular with investors however for consistent dividends and strong balance sheets.

Wesfarmers (ASX: WES) is perhaps an interesting one, with Kmart and Bunnings having benefited from consumers trading down due to cost-of-living pressures. It is a SELL on Broker Consensus, though Adam Alexander at Schroders views it as a HOLD and holds the conglomerate in his portfolio. He argues that “the management execution across Bunnings and Kmart is an exception and these businesses will continue to grow.”

Of the two miners, Fortescue (ASX: FMG) is a SELL – it’s had a challenging year with questions raised over its green energy capex requirements and falling iron ore prices. By contrast, BHP is looking to be in a more promising position and ranks as a BUY. It is investing hard in building out its copper business, along with potash. CFO Vandita Pant told Livewire that the company is confident that its competitive position would mean it still had plenty of mileage from iron ore, despite falling demand from China.

Goodman Group (ASX: GMG) ranks as a HOLD and has continued to offer solid performance in recent years. By contrast, Medallion Financial’s Michael Wayne nominates it as a BUY, saying “We’re not too phased by the valuation given the double-digit expected growth in the earnings profile in the years to come.” He also likes the increasing focus on data centres.

Finally, it should come as no surprise that market darling CSL (ASX: CSL) continues to be a STRONG BUY. I’m yet to find a fund manager that doesn’t like CSL, with Seneca Financial Solutions’ Luke Laretive recently commenting, “While it’s not dirt-cheap, at 30 times its earnings guidance of US$3.2-3.3 billion, which we believe is conservative, it doesn’t feel stretched either.” You can hear directly from CSL itself in this interview between Livewire’s James Marlay and CFO Joy Linton.

So what are your thoughts – what will the top 10 look like in next 100 years? (And are we holding them now…)