Blackberry Jam's On Apple's Juice

Some investors attribute the Magnificent 7 stocks’ dominance to a “winner-take-all” environment in which a handful of companies achieve sufficient market share to hinder competition.

In businesses where gaining users drives success, establishing a strong market share may be like building a moat around profitability. But that doesn’t guarantee these companies can stay on top.

Think about the state of mobile phones 15 years ago. In all likelihood, you would have been reading this on a BlackBerry, such was that device’s entrenchment for mobile business communication.

Then, along came Apple's iPhone and Google Androids and suddenly BlackBerry’s foothold was eroded (as did Nokia's, it's share price currently sits at €3.25, a long way from its high €62.45 in June 2000).

History is littered with examples of household names that were usurped by the Next Big Thing.

AOL was synonymous with internet access in the 1990s. And in 2003, the most popular social media network starting with the letter F was Friendster.

Even the biggest companies have uncertain futures (Blockbuster, MySpace, Kodak, Yahoo! Palm and Compaq), highlighting the need for broadly diversified investments. And even if these companies stay at the top of the market, that’s no assurance higher returns will continue if their success is expected.

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Footnote

In assessing the financial health and potential of these market-leading companies, one valuable metric to consider is the trailing 12-month (TTM) sales per share. This figure represents the total revenue a company has generated over the past year, divided by the number of outstanding shares.

It offers a clear snapshot of a company's operational efficiency and its ability to generate sales from its asset base, which is crucial in understanding whether a company's market position is backed by solid financial performance.

High TTM sales per share can indicate that a company is effectively leveraging its assets to generate sales, a key factor in sustaining its competitive moat.

Conversely, a declining trend may signal potential challenges ahead.