Apple and Microsoft are the two largest companies in the S&P 500 by a wide margin. Apple was the undisputed champion for years, but in early February 2024, Microsoft dethroned it and claimed the throne as the S&P 500's largest stock by market capitalization. As of March 5, 2024, Microsoft accounted for 7.14% of the S&P 500. Apple, on the other hand, was a close second with her 6.08%. His next closest stock, No. 3 Nvidia, accounts for just 4.7% of the index.
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Microsoft's rise has a lot to do with its recent superior performance against Apple, but how can these two tech giants evenly compete over a longer period of time, such as a decade? Let's look at the numbers behind it.
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Apple's 10 years of performance
On March 5, 2014, Apple stock closed at $16.75, adjusted for all splits. Ten years later, on March 5, 2024, Apple closed at $170.12. Patient investors who held on to the stock through all its ups and downs were rewarded with what Wall Street calls a “10 bagger,” a stock that returned 10 times the original investment. On a percentage basis, those who held Apple stock over the past 10 years earned a return of 916%.
Microsoft 10 years of performance
Microsoft's stock price over the past 10 years started at $32.27, re-adjusting all splits. The closing price on March 5, 2024 was $402.65, an incredible 1,148% increase. That's even higher than Apple's impressive 916% return, and more than a 12x return for Microsoft investors who held the stock for the entire 10 years. As impressive as Apple's performance has been over the past decade, Microsoft's rapid growth helps explain why the company, at least temporarily, usurped Apple's top spot in the S&P 500 market cap.
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How has it been since its founding?
Apple became a publicly traded company on December 12, 1980. His IPO price that day was $22, but after years of split adjustments, the effective IPO price was just 10 cents. This gives Apple an average annual return of 18.87% since its inception, compared to an annualized return of 10.38% for the S&P 500 over the same period. This is a pretty impressive accomplishment, especially for a company that has been publicly traded for over 43 years.
Believe it or not, Microsoft's performance is even more dramatic. The company went public on March 13, 1986 at $21 per share. The split-adjusted IPO price was effectively $0.0729 per share. Crunching the numbers from there, we find that Microsoft has posted an average annual return of 26.18% since its inception. Meanwhile, the S&P 500's annual return since Microsoft's IPO date was “only” 10.38%. In other words, Microsoft has outperformed the S&P 500 by an average of two and a half times every year for the past 38 years.
Which stock would be better to buy in the future?
Based on recent momentum, Microsoft is currently the most likely player. The stock price has increased 8.57% since the beginning of the year as of March 5th, and has increased 58.43% over the past year. Analysts have an average 12-month price target of $468.70 for the stock, giving it a consensus rating of “Strong Buy.” If MSFT hits that target, it would earn an additional 16% over the next year.
Apple has long been a Wall Street darling, so it's no wonder that analysts have a unanimous “strong buy” rating on the stock, despite the recent pullback. The average 12-month price target of $205.77 suggests 21% upside is possible over the next year.
Which stocks are best for you depends on a combination of your investment objectives, risk tolerance, and your opinions about stocks and company performance. For example, if you're a consumer products investor, you might give Apple the nod. If you're looking to buy a more technology-oriented stock on the cutting edge of AI, Microsoft may be more appealing. The type of investor you are can also have an impact. For example, if you like stocks with momentum, you might choose Microsoft. But if you're looking for a high-quality stock that has recently sold and analysts say has a higher potential return over the next 12 months, Apple may be for you.
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This article originally appeared on GOBankingRates.com: 10 years ago, was Apple or Microsoft a better investment?
