Investment View

There hasn&#39t been much change at the top of my favourite list this year.

Perhaps I should say my favourite business list. I refer, of course, to

Fortune Magazine&#39s list of the US top 500 corporations. The Fortune 500 has

been around for a long time now and it makes fascinating reading.

Fortune ranks companies by sales. Other measures are used for compiling

subsidiary schedules, using numbers of employees, market capitalisation or

growth rates but it is the value of a corporation&#39s sales that defines the

actual 500 itself. Thus, companies like Microsoft come a long way down,

even though when this particular list was compiled (it was actually

published last month), Microsoft was still the world&#39s most valuable

corporation. How the mighty have fallen. Microsoft has shed nearly half its

market value so far this year. Still, I suppose that is what makes the

selection of the criteria you use so important. The stockmarket can be very

fickle in terms of the valuation it places on your business.

The growth ratings look most interesting. Dell Computer tops this

particular list, for the 10 years to the end of 1999 anyway, recording an

average of 52 per cent growth in revenues. Second in line is Microsoft ,

with a 37.5 per cent average, while interestingly both Berkshire Hathaway

and Charles Schwab are also up there with the leaders. Berkshire Hathaway

has been having a lean time of it recently, with Warren Buffett admitting

that technology as an investment area had passed him by. Charles Schwab, on

the other hand, is as much a beneficiary of new technology as any business.

Along with Dell and Microsoft, Schwab ranks in the top 10 of fastest-

growing companies by profits and in terms of how much money they have made

for their shareholders. Berkshire Hathaway does not even make the top 50 in

either of those lists.

One day I must try to compile a list of stock exchanges. Once again, the

use of different criteria will produce varying results. The market

capitalisation of the shares traded on an exchange, turnover, volumes,

profits – all can lay claim to providing a valid measure of worth. And,

like the Fortune 500, whichever you use is likely to give a different

answer.

The new London/Frankfurt axis – or IX as it is to be known, whatever that

means – may not yet be eligible to top any of the Exchange lists but

perhaps that is the aim. The cynics among us might wonder if any list of

exchanges will be around long enough to enable Europe&#39s leading stockmarket

provider to clamber into pole position. Securities trading is eminently

suited to migration to the market. London has looked vulnerable for some

little while, given its chequered history in technological innovation and

the loss of its last remaining regulatory role to the FSA.

Yet London&#39s position as equal partner demonstrates its continuing

importance as a financial centre. More money is managed in London than

anywhere else in the world – more than 1.4trillion, assuring you subscribe

to the American view that a trillion is one thousand billion. Frankfurt, in

contrast, can muster only 12th position – just behind Edinburgh. And the

City of London alone has more office accommodation than the whole of

Frankfurt, and more than a third of the City&#39s offices are occupied by

foreign firms compared with just 20 per cent in Germany.

While we can take comfort from knowing that the skills that we have here

are greater than anywhere else in Europe, it would to underestimate the

importance of the internet. This is the driving force behind the

amalgamation of the Paris, Amsterdam and Brussels exchanges, which together

push Frankfurt into third place in Europe – London is, of course, number

one. Even New Zealand is rumoured to be holding talks with the Australian

stock exchange. At least they share a common language.

The threat is worldwide and comes from electronic communications networks,

of which there are already a number in the US. They are taking a growing

percentage of business there and are known to have their sights on Europe,

even though this will be a tougher market to crack. Ruben Lee&#39s recent

book, What is an Exchange?, terms ECNs as Monsters – Market-Oriented New

System for Terrifying Exchanges and Regulators. Never have I heard such an

apposite acronym.