Top 10 Largest Australian Companies by market capitalisation

What are the largest companies in Australia by market capitalisation?

Gazing upon a list of Australia’s 10 largest publicly listed companies by market capitalisation provides a succinct insight into the structure of the Australian economy. The major mining companies, who’ve for years benefitted the Chinese economic boom, and the Big-4 banks, who’ve enjoyed many of the spoils of several property booms, occupy 6 out of the 10 spots on the list, and 4 out of the top 5. Combined, they constitute 35% of the total market capitalisation of the ASX200, or roughly $640 billion on a nominal basis.

It’s certainly a dense concentration of value. And while it’s true that the overall fortunes of the Australian economy and ASX are leveraged significantly to the fate of the miners and banks, for investors and traders interested in entering the Australian share market, it is far from the full story. Conveying the changing face of the Australian economy, global investment bank Macquarie Group holds its weight amongst its financial services cousins, biotechnology firm CSL is a growth-investor favourite, and retail giants Woolworths and Wesfarmers are perennial investor staples.

BHP Group (BHP)

At present, BHP Group is the largest company on the ASX. Boasting a market capitalisation of nearly $160 billion, BHP is a global mining giant, specialising in the exploration and production of commodities such as coal, gold, copper, and iron ore, as well the exploration and refinement of petroleum. A dually listed firm, but with its Australian headquarters based in Melbourne, BHP delivered earnings per share (EPS) growth of 34.7% in financial year (FY) 2017/2018, and a 12 month gross yield of 13.02%.

Commonwealth Bank of Australia (CBA)

The biggest of Australia’s Big 4 Banks, and a frequent contender for the title of Australia’s biggest publicly list company, the Commonwealth Bank of Australia is the second largest firm on the ASX. Best known as Australia’s premier retail bank, the CBA is Australia’s largest residential lender. Valued at nearly $130 billion, the company handed a 12 month gross yield of 8.55 to shareholders, but negative EPS growth in 2017/18, after a financial year plagued with regulatory and compliance scandals.

Rio Tinto (RIO)

Another international mining giant, based in London, Rio Tinto is Australia’s third largest company by market capitalisation, and second largest mining company. Specialising in the mining of several commodities, including aluminium, copper, gold, coal, petroleum, diamonds, and iron ore, Rio is valued currently at almost $120 billion. In FY2017/18, the company provided shareholders with EPS growth of over 40%, a dividend yield of 7.14% for the financial year, all while possessing attractive price-to-earnings (P/E) ratio of 10.23.

Westpac Banking Group (WBC)

Australia’s second largest bank by market capitalisation, Westpac provides commercial banking services to individuals, businesses, corporations and institutions both domestically and abroad. Australia’s oldest bank, established in 1817 as the Bank of New South Wales, Westpac is one of two of Australia’s Big 4 Banks headquartered in Sydney. The company delivered to its shareholders a 10.43% 12 month gross yield in FY 2017/18, along with EPS growth of over 2.5%, during what was scandal-ridden period for the bank.

CSL Limited (CSL)

CSL is a leader in Australia’s burgeoning biotechnology industry. Valued by market capitalisation at $89 billion, the company develops, manufactures and markets human pharmaceutical and diagnostic products made from human plasma. A high-growth stock, CSL trades presently at a P/E multiple of 36.69, making it an attractive investment for investors searching for capital appreciation. One of 2017/2018’s best performing shares, in the growing healthcare sector, CSL shareholders experienced EPS growth of 30% in that financial year.

ANZ Banking Group

The ASX’s third largest bank, ANZ positions itself as Australia’s bank with reach throughout the Asian region. An institution with a global mindset, the ANZ derives a quarter of its revenue from its institutional service offering. Of course, it also specialises in areas from depositary banking, mortgage lending and general finance. Like its industry counterparts, FY 2017/18 was a challenging year for the ANZ. However, the bank still managed to deliver 11% EPS to shareholders in that period.

National Australia Bank (NAB)

The smallest of Australia’s Big 4 banks, the National Australia Bank is valued at $68 billion by market capitalisation. Considered Australia’s 'business bank', NAB derives most its revenue from domestic operations. The NAB is one of two of Australia’s Big 4 based in Melbourne, the other being the ANZ. Known for its attractive pay-out ratio, NAB provided shareholders an attractive dividend yield of 11.55% in FY 2017/18, but underwhelming EPS growth of -4.3%.

Macquarie Group (MQG)

Macquarie Group is Australia’s largest investment banking firm, with a significant international presence. Affectionately known as the 'millionaire’s factory', shareholders themselves have shared in the benefits of a growing Australian corporate giant, attributable in large part to the vision of its recently resigned CEO Nicholas Smith. Boasting a market capitalisation of $40 billion, the investment bank has almost doubled in size since 2015, and according to its last financial report, saw EPS growth of nearly 75% in 2018.

Woolworths Group (WOW)

Australia’s number one food retailer, Woolworths Group specialises in the operation of supermarkets and general consumer stores, along with engaging in the procurement of food, liquor and other products. The company also has interests in other consumer goods and services, ranging from pubs, accommodation and gaming operations. Valued by market capitalisation at nearly $40 billion, Woolworths is considered by investors as one of the ASX’s 'defensive' consumer staples sector stocks, the company’s 12 month gross yield for FY 2017/18 was 4.87%.

Wesfarmers (WES)

The tenth largest company on the ASX, with a market capitalisation of almost $37 billion, is Perth’s Wesfarmers Ltd. Specialising in several different commercial areas, Wesfarmers owns retail chains, operates mines, writes insurance, produces industrial products and distributes liquefied petroleum, amongst other activities. Having driven EPS growth of over 5% in 2017/18, Wesfarmers is generally a high-yielding defensive stock, delivering last year a gross 12 month yield of 9.82%.

How to trade the largest companies in Australia

Trading Australia’s large cap shares can provide a trader with the ability to benefit from changes in the share price of some of nation’s biggest corporate names. Moreover, share CFDs allows a trader to gain exposure to movements in Australia’s largest companies, while not owning the underlying stock. Companies with large market capitalisation are generally much more liquid than smaller, more volatile stocks, meaning relatively lower risks for traders wishing to trade in the equity market.

Developing a trading strategy is very important before jumping in to trading shares or share CFDs. One part of this process is gaining an appreciation of what makes the price of a stock move. Some traders prefer to trade 'top down' by looking at broader macroeconomic themes and applying them to certain industries, and then particular stocks within that industry. Others take a 'bottom up' approach by analysing a company’s fundamentals, to determine whether the current market price properly reflects future earnings.

Trading Australia’s top 10 companies by market capitalisation affords amply opportunity to benefit from changes in the Australian corporate and economic environment. Whatever the approach taken, trading shares is generally considered to be riskier than when trading a currency, index, or major commodity market. Of course, this means the potential for higher returns, but an adequate risk management strategy ought to be implemented by a trader to protect their capital.