The Best Day of the Year for Business Junkies : The Fortune 500


Well, at least it’s one of the top days of my year, and has been for a long time. I have very few annual rituals: I have been in my hometown in Indiana for Christmas Day with my family 56 of 58 Christmases; I have watched the Indy 500 in person or on TV, or listened to it on the radio, every time but once since about 1957; and I have watched most of the Kentucky Derbies in person or on TV. But most consistently, every year beginning in 1963, when I was 12 years old, I have received the new Fortune Magazine list of the 500 largest companies and dashed off to study it – who’s up, who’s down, which industries had a good year and which ones had a bad year, who merged with whom.
I discovered my first Fortune 500 issue – and still have it – when I was a kid trying to understand General Motors, by far the most important force in my hometown. Back then it took a lot of work to find out information about companies. So I went down the list, name by name, and found out what they did, and a bit about their history. If I didn’t know anything about them – which meant most of the companies on the list – I went to the library or the local stock brokerage office to bury myself in Moody’s and Standard & Poor’s Manuals, and later Value Line and other sources of company data. I took page after page of notes.
The next year, I hand-wrote rankings alongside each company so I could see the three-year trend. And every year since then, I can’t wait for the new list to come out, and see what it tells me.  Years later, my love of business information led me to found Hoover’s.  The publishers of Fortune (Time Warner) invested in Hoover’s, so in 1996 Hoover’s and Fortune co-published a guide to the Fortune 500. So your young dreams really can come true!
I have acquired almost every copy of Fortune including the first issue, published by visionary publisher Henry Luce in February, 1930. They are a treasure trove of business lessons.
Last Saturday, April 25, I received the 2009 500 issue, containing data for 2008. So it’s time for me to take a look and do some comparisons.
Ranking America’s most important public (and selected private) companies by revenues (sales), the Fortune 500 has been called the “ultimate corporate scorecard.” Few people realize that the definition of the 500 changed dramatically some years back. The original list, which began in 1955 (with data for 1954), covered only “industrial companies” – which means retailers, banks, insurance companies, utilities, transportation companies, and other service companies were not included. In the mid-1990s Fortune began including all types of companies on the list, as service companies have become more important.
Those of you who have followed my posts won’t be surprised that I am more interested in the trends over long spans of time than in the performance in any given year or couple of years. Because of the definitional change, I can either look at the industrial – manufacturing – companies all the way back to the founding of the list, or I can look at the “all industries” comparisons over the last 15 years.
For this post, let me first focus on industrial America and how it has evolved over the last 50 years. In the future I hope to do other comparisons and studies.
In the new list (2008 results), just under half of the 100 biggest companies are what would be called “industrials” under the old definition. While 50 years ago, in 1958, there were 10 or so giant companies outside manufacturing – mainly retailers – they fell well short of comprising half of the biggest companies in America. We are indeed becoming a service economy, a trend that has been underway for over 100 years.
The top industrials of 1958 were, in order:
1.      General Motors, ranked #1 most of the time over the years
2.      Standard Oil of New Jersey, later renamed Exxon, one of the first “made up names”
3.      Ford
4.      General Electric
5.      U.S. Steel (today ranked 51st among industrials, just ahead of steely newcomer Nucor)
6.      Socony Mobil, later just Mobil, now part of Exxon Mobil
7.      Gulf Oil, no longer an independent company
8.      Swift, the meatpacking giant, also now swallowed up and split up
9.      Texas Company, later Texaco, no longer independent
10.   Chrysler (declared bankruptcy April 30, 2009)
My list excludes such giants as Shell USA and Western Electric, which were on the old Fortune list but were in fact parts of larger companies on other lists (the largest foreign company list and the largest utility list, since Western Electric was the manufacturing arm of AT&T back then).
In 2008, we witness the sharp decline of the auto industry at the end of the year, and the rise in big oil due to high prices for much of the year. So, taking out the service companies, the 2008 list would look like this if Fortune used their old “industrials” definition:
1.      Exxon Mobil
2.      Chevron (was Standard Oil of California, 17th 50 years ago)
3.      ConocoPhillips (Phillips Petroleum was 30th 50 years ago; Continental Oil 58th)
4.      General Electric
5.      General Motors (lowest it has ranked in the history of the list)
6.      Ford
7.      Hewlett-Packard (tiny in the 1950s; joined the 500 in 1961, ranking 460th)
8.      Valero Energy (giant oil refiner and marketer that “came out of nowhere,” spun out of Coastal States Gas in 1980)
9.      IBM (first of the information age giants, ranked 26th in 1958)
10.   Procter & Gamble (22nd in 1958; 172 years old this year!)
Perhaps the most striking thing to me is that so many of the same names are still at the top, after all these years and through all this change. I think that if we look at this list in another 5-10 years, we may see more dramatic change than ever as the former “big three” automakers evolve into resized and restructured entities, perhaps not even “American” companies.
If you haven’t looked at the new list yet, which can be found at, here are the top twenty under the “new” definition which is no longer limited to industrial companies:
1.      Exxon Mobil
2.      Wal-mart (did not exist in 1958)
3.      Chevron
4.      ConocoPhillips
5.      General Electric
6.      General Motors
7.      Ford
8.      AT&T (the original AT&T was a utility and a very large company in 1958; the present AT&T is the former Southwestern Bell, then SBC, which came out of the old AT&T and later gobbled up its former parent, along with some of the other “baby bell” companies)
9.      Hewlett-Packard
10.   Valero Energy
11.   Bank of America (the largest bank in assets in 1958)
12.   Citigroup (#3 bank in 1958 as First National City Bank of New York)
13.   Berkshire Hathaway (did not exist in present form in 1958; although many of its constituent companies did exist, none of them were giants)
14.   IBM
15.   McKesson (giant wholesale drug company, was 13th biggest “merchandising company” in ’58)
16.   J.P. Morgan Chase (components of the present company were 2nd, 5th, 7th, and 25th biggest banks in 1958 – and others that have been merged into this giant)
17.   Verizon Communications (was a part of the old AT&T)
18.   Cardinal Health (another drug wholesaler, founded in 1971 making it one of the fastest companies ever to get so big so young, alongside Valero Energy)
19.   CVS Caremark (drug retailer and delivery system which was not a player in 1958)
20.   Procter & Gamble
This list says a huge amount about the growth of health care in the United States (which even affects P&G with some great businesses like Pepto-Bismol) and of financial services. While Wal-mart is near the top of the list, and may get to #1 if oil prices drop or, over the long pull, our use of oil declines, we have always had big retailers, just not quite that big. In 1958 the following nine retail chains would have been big enough to qualify within the top 50 industrial companies:
1.      Great Atlantic and Pacific Tea Company, $5 billion sales (America’s first giant retail chain, dating from the 19th century; would have ranked fourth in an overall 1958 list; they’re still around today but much less important)
2.      Sears, Roebuck, $3.7B sales (would have ranked #7 then, they’re 49th today, even after merging with Kmart they are smaller than Wal-mart, Costco, Home Depot, Target, Walgreen, or Lowe’s)
3.      Safeway, $2.2B sales (would have ranked 13then, 50 now)
4.      Kroger (today ranked 22nd in the overall list)
5.      J. C. Penney (139th today)
6.      Montgomery Ward (the largest of these retail companies that went bankrupt and no longer exists)
7.      American Stores (merged away)
8.      F. W. Woolworth (closed the old dime stores and evolved into Foot Locker, believe it or not)
9.      National Tea (long-gone Chicago grocer)
These lists indicate the dramatic long term shifts at work like the rise of computers and health care, while at the same time showing some industries where the names of the leaders haven’t changed that much (banking and autos) while others have had extreme turmoil (retailing).
More can be learned from studying this great list and the many others which have come along in its wake.  Which industries are consistently most profitable? (Think mass-produced consumer products: soft drinks, drugs, soap, and cigarettes.) Where are the most companies headquartered? (Today the #1 state is Texas, and although New York City has always been the number one city, Houston is #2, Dallas is #3, and Atlanta #4 – a big change from the old days!)
I hope to write a lot more about these kinds of topics in the future – let me know if you like this kind of material. I find such lists – and their implications – fascinating barometers of our economic life.