Large Cap Stocks Move Up in 2010
Big can be beautiful, especially when investors are wary of the stock market.
Large-cap stocks, low in price but high in exposure to rapidly-growing international markets, appear poised for a comeback.
Companies with market capitalizations of
"After a tumultuous time in the market, people tend to go out and buy big names," said
The international emphasis of big companies means less pain when all is not well with the U.S. economy. A sideways economy here almost always turns investor attention to large caps, Roseen explained.
"When investors are scared about the big macro picture and not feeling adventurous and speculative, you see the money flow into big-cap stocks," noted
Everyone should have a core portion of their individual portfolio that is stable, dependable and producing results year in and year out, Wright believes. There may not be fireworks every quarter, but big stocks don't "get creamed" as badly when things turn negative, either.
"The U.S. dollar really got strong through July and has weakened about 15 percent since then," said
"When I look at a company like
(MCD), all I can say is 'wow' because it continues to knock the cover off the ball," said Wright, pointing out that the
restaurant chain has been impressive going after
Of course, not all big companies are great. A good one must have strong management, understanding of its markets and ability
to make money in both good and tough times, he said. Another prime example is
"Nike is a cash machine," said Wright, noting that the famous Nike swoosh seems to be everywhere these days. "If you look at kids' feet they're probably wearing Nikes, we are also in the heart of the football season and the company is consistently showing top-line performance rather than simply benefiting from cost-cutting."
Turning to what he considers the "dull and boring," he admires Procter & Gamble Co. (PG) even though it could be considered the most mature of all the consumer staples, known for familiar products such as Tide.
P&G gets more than 60 percent of earnings from overseas as it continues to tailor its products to meet the growing middle classes in developing nations. It is a big firm but not just sitting there, instead squeezing money out of brands that have been around forever.
"Procter and Gamble is now franchising Mr. Clean car washes," Wright said. "How brilliant is that?"
The price is right for most dividend-paying big-cap stocks, Forester believes.
"Altria Group Inc. (MO) spun off its
(HPQ) has strong enough products that you can overlook questionable decision-making by its board of directors, he said. That lately has included its controversial selection for CEO of
But while big stocks look good, there's been no wild rush into big-cap stock funds. There has actually been a rush to the exits due to general consternation over the future of the stock market. Through the first three quarters of the year nearly
"Clearly, people are looking for safety and turning to fixed income more than large-cap stocks for their 401(k) and other accounts," said Roseen. "However, after a great September for the market, investors are more likely to come back to big-cap stocks."
Big-cap stocks remain a necessary part of a well-rounded portfolio, he concluded. While it is perplexing that big-cap stock mutual funds haven't attracted the kind of money you'd think they would have by now, the current scenario may present buying opportunities.
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