If you’re like most investors, then you probably already have large-cap stocks. These stocks are those of companies with large market capitalizations. This indicates their market value. These stocks have a larger market capitalization than smaller-cap or mid-cap equities and are thus called large-cap stocks.
What is the definition for a large-cap stock?
Any publicly traded corporation that has a market capitalization of more than $10 billion is a large-cap stock. Large-cap equities are also called big-cap stocks. They are often referred to as market stalwarts and blue chips. Think of companies like Walt Disney (NYSE.DIS), Coca-Cola(NYSE.KO), or General Motors (NYSE.GM) — industry leaders that have dominant market positions.
Large-cap corporations that have a market capitalization of more than $200 billion are also included in the large-cap category. They are sometimes referred to as mega-caps by investors, but they are essentially large-caps.
Large-cap stocks can be very rewarding for investors who take the time and understand them. However, many investors prefer smaller, faster-growing companies to be more appealing. These giant corporations are less volatile than smaller companies, which can help diversify portfolios of smaller equities and still contribute to long-term share prices. Because they have more stable earnings streams and are established, they can be safer investments than smaller companies. Large-cap equities are often more profitable than small-cap stocks in a weak market.
There are many large-cap growth businesses available, such as Meta Platforms (NASDAQ :FB) or Nvidia (NASDAQ :NVDA), which is Facebook’s parent company. Although there is no standard definition of a growth stock or company, any company whose revenue rises by more than 20% can be considered one.
Large-cap growth stocks are an exception. Many large-cap equity issues are issued by well-established corporations that have modest growth potential. Investors looking for significant growth potential may prefer smaller firms at the lower market capitalization range.
Large-cap corporations tend to be older and more established, offering dependable dividends. Many of these companies are well-known but not all are household brands. Large-cap blue chips have stable management teams with solid credit ratings and a long track record of earnings. Other industrial giants are often characterized by cyclical business cycle, which means that earnings and stock prices tend to fluctuate with the economy. A few years back, large-cap companies might have been classified as small-cap or mid-cap due to their rapid growth.
Over the past decade, large-cap equities outperformed smaller-cap counterparts. When the COVID-19 pandemic hit in March 2020, the S&P 500 was less than the Russell 2000.
These are the top large-cap stocks in 2023
These outstanding stocks are large-cap stocks worth considering:
1. Starbucks (NASDAQ:SBUX).
Starbucks has grown faster than the market overall since its 1992 initial public offering (IPO). It is ready to keep gaining market share once it recovers from the epidemic. Starbucks is a great example of a large-cap firm that offers growth opportunities with delivery and digital options in China. It also has stable earnings streams. It has many competitive advantages including its well-known brand and popular loyalty programs. They also have digital efforts like Mobile Order & Pay.
Starbucks has faced many obstacles, including a Chinese pandemic, a unionization campaign and tight labor markets in the United States. The corporation has overcome adversity before and should be able again.
The company began paying dividends in 2010. They have increased each year since, making it a potential future Dividend Aristocrat.
2. MercadoLibre (NASDAQ:MELI)
MercadoLibre is the largest e-commerce site in Latin America and is an excellent example. It is growing rapidly while still being large in size. MercadoLibre shares many similarities with Amazon, including its largest e-commerce site and shipping network, MercadoEnvios. However, it also offers unique solutions for Latin America such as point of sale equipment for brick-and mortar retailers.
This feature is available in MercadoPago (the company’s expanding payment system). It was initially a similar service to PayPal (NASDAQ;PYPL), but it has since grown to be a transnational bank in Latin America. This allows customers to pay at petrol stations and grocery shops.
3. Walmart (NYSE:WMT)
Walmart is the world’s largest retailer and the biggest firm in terms of revenue. Walmart has many competitive advantages including economies of scale and low prices. It also has shops within 10 miles from 90 percent of the U.S. populace.
Walmart is more than a long-standing Dividend Aristocrat. It is also expanding beyond retail. The corporation has established health clinics to expand its reach into healthcare. In early 2021, it also established a fintech company and hired two executives from Goldman Sachs (NYSE GS) to manage it. It has established an e-commerce business that is competitive and ranks second to Amazon in the United States. This gives it a significant stake in an expanding industry. Walmart could be quite different in five to ten years due to its evident evolution.
Walmart’s reputation for low prices means that it is well-equipped to weather a recession or economic crisis.
Top large-cap mutual fund picks for 2023
You don’t have to choose large-cap stocks. However, portfolio exposure to large corporations can still be achieved by investing in large-cap ETFs, mutual funds, or large-cap growth fund.
Take a look at these large-cap mutual funds.
1. Vanguard S&P 500 Exchange Traded Fund (NYSEMKT.VOO)
Vanguard S&P 500 Exchange-Traded Fund is an exchange-traded mutual fund that reflects the performance of the S&P 500. Vanguard was the first to introduce an index fund. Funds that track the S&P 500 are still the most popular. The fund has a low expense ratio, which makes it a great option for beginners or people who prefer to invest in large-cap stocks.
Secondly, Fidelity Contrafund (NASDAQMUTFUND:FCNTX)
Fidelity Contrafund, a mutual fund, invests primarily only in large- and large-cap equities. It focuses on large-cap companies with high long-term earnings growth potential. Although the cost ratio is higher than an index fund’s, 0.86 percent is still a significant amount. However, the fund’s manager is active and strives to beat the S&P 500. The outperformance should be more than enough to offset the higher costs, at least theoretically. Fidelity Contrafund’s five-year total return has outperformed the S&P 500 in the past five years.
How to evaluate large-cap stocks
There are many outstanding large-cap stocks. There are many outstanding large-cap stocks, including MercadoLibre which was once a small-cap growth stock that has continued to grow. Others, like Starbucks, are well-established players in difficult industries. Still others, like Walmart, have a long history with strong management and consistent growth.
Nearly every large-cap company has a competitive advantage, strong branding, established management and a track record of rewarding shareholders through dividends, share buyback schemes or long-term increase in share prices.
Motives for purchasing large-cap stocks
Large-cap stocks are a good option if you have the financial means to keep your investment in place for at least five consecutive years. A prudent way to diversify your portfolio without losing any growth prospects is to add a few large-caps that are reliable.
Even though large-cap stocks tend to be those of well-known firms, it is important to do your research before you invest. A large-cap mutual fund or ETF might also be a good option.
