After a tumultuous twelve months, it may be time to look at large-cap stocks as a potential investment. Large-cap stocks have traditionally been more stable and less volatile than their smaller counterparts, making them attractive for long-term investors.
Large-cap stocks are companies with market capitalizations north of $10 billion. These companies are generally larger, more established, and have more resources and deeper pockets than their smaller counterparts.
When it comes to investing in large-cap stocks, there are several benefits. These include:
- Lower volatility: Large-cap stocks tend to be less volatile than other types of investments due to their sheer size and presence in the stock market.
- Safety net: Because they are larger companies with lots of cash reserves, they can weather economic downturns or unexpected events better than small-cap stocks.
- Name recognition: Larger companies often have strong brand recognition, which can attract more investors.
- Diversification: Investing in large-cap stocks can also be a way to diversify your portfolio; they are often not as correlated with other asset classes.
Berkshire Hathaway – a long-standing company with a strong track record
Berkshire Hathaway is a long-standing company with a strong track record. It was founded in 1839 by Oliver Chace and has been publicly traded on the New York Stock Exchange since May 1965. The company is headquartered in Omaha, Nebraska and is currently led by Warren Buffett, one of the most successful investors of all time.
Berkshire Hathaway is a conglomerate that owns or has interests in various businesses, including insurance, utilities, railroads, manufacturing, retail and food service. Some of its more well-known brands include Geico Insurance, Dairy Queen, Fruit of the Loom, and Benjamin Moore paints.
Why Berkshire Hathaway is an attractive large-cap stock
- Oracle of Omaha: Warren Buffett, who leads Berkshire Hathaway, is known for his value investing approach. The company is always looking for stocks with good long-term growth potential. Warren’s keen eye for well-timed investments has earned Berkshire Hathaway $13 billion over the past year with investments in Occidental Petroleum and Chevron.
- Diversified portfolio: As a conglomerate, Berkshire Hathaway has a wide range of investments, making it less vulnerable to external shocks.
- $147 billion cash from insurance float: Berkshire Hathaway’s key advantage is its large insurance float. This is a large sum of money they have collected from their insurance policies which it can invest in various stocks and businesses.
Apple – a tech giant with massive potential
Apple is widely regarded as an innovator in the tech space, with a strong focus on product design and marketing.
Over the years, it has become one of the most valuable companies in the world, with a market capitalization of $2.4 trillion.
Why Apple is an attractive large-cap stock
- Thriving services segment: Apple’s services segment, which includes the App Store, Apple Music and Apple Pay, recently reached a record $19.5 billion in revenue. This provides the company with a steady stream of recurring income, which provides stability in financial forecasts for investors.
- A history of dividend increases: Apple has a long history of dividend increases, making it an attractive stock for income-seeking investors. Despite its large size, the company has increased its dividend yearly since 2012.
- Cash flow: Apple is a cash-flow powerhouse with strong free cash flow margins. Apple generated $122 billion in operating cash flow in the last fiscal year. With such a vast amount of cash, Apple can pay dividends to its stockholders or repurchase shares of itself.
Starbucks – a well-known brand with global appeal
Starbucks is a global coffee powerhouse, with over 32,000 stores in 80 countries. The company has a well-known brand, and millions of people enjoy its products daily.
Despite its size, Starbucks remains quite an agile and innovative company. With a strong focus on customer experience, Starbucks was one of the first coffee shops to provide wifi at its locations.
Fast forward to 2022, and the company is still obsessive about delivering a high-quality and consistent customer experiences.
Why Starbucks is an attractive large-cap stock
- Not afraid to adopt new technology: Starbucks has embraced technology with its mobile ordering app and loyalty program, allowing customers to order and collect points for free drinks. Its commitment to technology was also seen in its move into web 3.0 technologies like NFTs.
- Strong sales: Despite the pandemic, Starbucks has come out on top with record net sales amounting to $8.2 billion in the third quarter of 2022. Its strong performance can be attributed to its improved loyalty program and focus on drive-thru locations.
- Loyal customer base: Starbucks has cultivated a loyal customer base with its well-known brand, which helps to drive repeat business. Customers often return for their favorite drinks or snacks and are willing to pay premium prices for quality coffee beverages.
Coca-Cola – an iconic name with staying power
Coca-Cola is a name that has been around for more than 130 years, and it is still going strong. The company has a stable of drinks that are popular all over the world, including Coke, Diet Coke, Minute Maid, and Honest Tea
Coca-Cola’s brand is one of the most recognizable and valuable worldwide. This may be a result of its world-class marketing and efficient distribution network.
Marketing campaigns like “Share a coke,” which saw coke bottles and cans printed with people’s names were huge hits leading the company to sell 150 million bottles and generated one billion+ impressions on social media.
Why Coca-Cola is an attractive large-cap stock
- History of increasing dividend: Coca-Cola has increased its dividend for 60 consecutive years, making it an excellent choice for income-seeking investors.
- Widely diversified product line: Coca-Cola has a wide range of products, from carbonated drinks to juices and sports drinks. This diversity helped to maintain the company’s profits despite a movement towards healthier alternatives.
- Excellent performance despite the pandemic: Despite the pandemic and pulling back on operations in Russia, Coca-Cola’s net revenue rose 10% in the third quarter of 2022. This was driven by increased demand for its products, particularly sparkling and energy drinks.
GSK – a healthcare giant
The company invests heavily in R&D, developing new treatments for cancer and other diseases. GSK’s products have potentially helped save millions of lives worldwide, and the company is now one of the top-rated large-cap stocks to buy.
Why GSK is an attractive large-cap stock
- Innovation: GSK announced in June 2022 their commitment to invest 1 billion pounds in R&D over the next ten years. This is on top of the 5.3 billion pounds spent on R&D in 2021. With this commitment, GSK is producing a large pipeline of new treatments and technologies, which will ensure the company’s innovation and strong sales in the long term.
- Partnerships: GSK has formed alliances with several companies in the healthcare sector, such as TB Alliance, to develop new treatments for diseases like tuberculosis. By leveraging partnerships, GSK is able to extend its reach and develop treatments for more conditions. For investors, this creates a win-win situation where they benefit from the sales of GSK’s products and services and being a part of a company at the forefront of healthcare innovation.
- Rapidly growing industry: Expected to grow past $1 trillion in 2023, the pharmaceutical industry is ripe for investors to benefit from the high growth. With GSK’s strong presence in this sector, investors will benefit from their impressive product portfolio and deep industry knowledge.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.