What are large cap stocks?
Large-cap stocks are stocks of big businesses with a market capitalization of over $10 billion. These stocks serve as the foundation of many buy-and-hold portfolios because they represent well-established businesses with diversified, global operations and a history of steady earnings growth. They have demonstrated their ability to withstand market volatility, and many of them distribute a dividend to shareholders in the form of a portion of their profit.
Some examples of these companies that issue large-cap stocks are Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), and Facebook (FB).
In times of market adversity, such as a recession or other bad news, large-cap stocks are known to be the market leaders because they are quite resilient. These stocks have a solid track record and have been around for many years. Therefore they are less volatile and have good long-term investments.
Large-capitalization stocks, also known as large cap stocks or big cap stocks, are a class of stock of companies with a large market capitalization of over 10 billion USD. These companies are very large, well-known corporations like Apple and Microsoft. Because of this, these stocks are frequently regarded as the safest equity investments.
List of Large Cap Stocks
|Name of company
|Johnson & Johnson
|Meta Platforms (Facebook)
|Procter & Gamble
Examples of Large Cap Stocks
|Price in $
|Altria Group Inc
|American International Group Inc
|Archer-Daniels Midland Co
|Bank of America Corp
|Bristol-Myers Squibb Co
|Capital One Financial Corp
|Cisco Systems Inc
|Comcast Corp Class A
|Dell Technologies Inc Ordinary Shares – Class C
Large cap stocks to buy
- AT&T Inc. (ticker: T)
- Dollar Tree Inc. (DLTR)
- Exxon Mobil Corp. (XOM)
- Kraft Heinz Co. (KHC)
- McKesson Corp. (MCK)
- MercadoLibre Inc. (MELI)
- Merck & Co. Inc. (MRK)
The above-listed are large stocks to buy, which will be discussed below.
AT&T Inc. (ticker: T)
AT&T experienced a lot of volatility in the last year, thanks in part to the uncertainty surrounding the spin-off of its media operations into what is now Warner Bros Discovery Inc. (WBD). However, shares are up more than 15% since the March split, and even though dividends have been reduced due to the core telecom business’s now-smaller operations, AT&T still yields an impressive 5.4 percent at these prices.
Although T-Mobile US Inc. (TMUS) is ostensibly a third player in American telecom, it is bloated with debt as a result of its merger with Sprint, and in many ways, AT&T and Verizon Communications Inc. are the only two players in this market in the country (VZ). After the dust has settled, AT&T stock appears to be in good shape. In a risk-free environment, the steady income from loyal customers will provide great comfort.
Dollar Tree Inc. (DLTR)
When consumers are watching their pennies, discount retailers like Dollar Tree and its subsidiary Family Dollar always do well. With smaller locations in some urban areas where big-box stores won’t go, this pair joined forces in 2015 to create one of the largest discount retailers out there. As a result, it has a built-in customer base that should keep pouring through its doors in droves.
It has projected a mere 5 to 10% increase in revenue for this fiscal year and in 2023, but due to efficiency and strong margins, it has also predicted a more than 40% increase in profits through year’s end. DLTR is a large-cap stock worth watching in a challenging year for American consumers, even though it may not have the cachet of some upscale blue chips stocks.
Exxon Mobil Corp. (XOM)
In the age of climate change, Exxon faces some significant long-term challenges. However, it’s undeniably on the upswing following a stellar gain of about 40% since Jan. 1 that has elevated it to the top tier of Wall Street’s large-cap stocks. Exxon Mobil has increased its stock repurchase program by three times to $30 billion in the future, in addition to paying a generous and dependable dividend of 4% that is more than double that of the typical S&P 500 component.
Not to mention other sectors, like Big Tobacco, which have overcome existential dangers to generate long-term shareholder value. There is a good chance that Exxon will be able to deliver for many years if it continues to be well-managed and responsible with its future plans.
Kraft Heinz Co. (KHC)
Perhaps no brand portfolio is more potent when it comes to consumer staples than Kraft Heinz’s. The company also owns Philadelphia cream cheese, Maxwell House coffee, Jell-O, Kool-Aid, and a number of other well-known consumer brands in addition to its namesake ketchup and macaroni and cheese.
Many consumers are eating less out and more at home as a result of the skyrocketing cost of goods across the board. That is a huge benefit for KHC, which is why shares have posted a modest gain in 2022 despite losses for other blue-chip stocks. There are numerous positive aspects of this grocery store icon, especially when you consider its 4% dividend yield.
McKesson Corp. (MCK)
McKesson is a world leader in medical equipment and one of the best-performing stocks on Wall Street this year, with a roughly 30% rise since Jan. 1. U.S. News recently named McKesson as one of the best growth stocks to buy right now. It is now the top large-cap stock that is not in the energy sector and one of the top 10 performers in the S&P 500 index. With its essential supplies for hospitals, surgery centers, and doctor’s offices, McKesson offers a recession-proof revenue stream that can withstand any market downturn. Whatever transpires in the latter half of 2022, this $47 billion healthcare behemoth is equipped to prevail.
MercadoLibre Inc. (MELI)
The $35 billion MercadoLibre, though not a household name, is undoubtedly a blue-chip stock to keep an eye on. MELI is frequently referred to as the Amazon.com Inc. (AMZN) of Latin America because it runs a mobile payments platform and consumer-focused online marketplace that dominates Brazil and Argentina. The analyst community anticipates great things from this emerging market e-tailer, with projected revenue growth of nearly 50% this fiscal year and another 30% in the fiscal year 2023, while Western consumer discretionary stocks are facing uncertainty.
For investors who want to look beyond the list’s more stable and traditional blue chips, MercadoLibre has seen a wave of upgrades this summer from major Wall Street firms like Citigroup, Goldman Sachs, and Credit Suisse Group AG.
Merck & Co. Inc. (MRK)
With a long history and a current portfolio of multibillion-dollar blockbusters like the cancer immunotherapy Keytruda and the diabetes medication Januvia, Merck is a mainstay of Big Pharma. To further support its future growth, it is also negotiating a $40 billion deal to acquire Seattle-based cancer biotech Seagen Inc. (SGEN).
For cash-rich companies like Merck that can make strategic acquisitions like this, the current challenging stock market environment has created a significant buying opportunity. Wall Street has bid the stock up sharply in July on optimism surrounding the deal. As an added bonus, MRK pays a nice 3 percent dividend on top, bringing its year-to-date gain to almost 17 percent.
Large-cap stocks vs small-cap stocks
When it comes to stock market company capitalizations, large-cap stocks and small-cap stocks represent the two extremes of the distribution. Additionally, despite having a similar form and function, they have very different characteristics.
Small-cap stocks are, first and foremost, stocks of companies that are frequently just starting out. Hence, they are inherently riskier than larger ones, despite the fact that they frequently rise to mid-cap or even large-cap status. This is because the stocks of large-cap companies have a track record of financial success, which makes their stocks much more reliable overall.
Another difference is the fact that small-cap stocks have the potential for much higher percentage returns because their value has more room to increase than large-cap stocks do. Since they are obviously less valuable than larger stocks, their share prices are also lower. Even with this fact, large-cap stocks are typically safer, despite having higher share prices.
Characteristics of large-cap stocks
- Dividend payouts
- Overall stability
- Reputable management
- Easily evaluated
An investor receives a dividend payment from the company’s earnings. Dividend payments can be made on a monthly, quarterly, biannual, or annual basis. In addition to the returns received through price appreciation, many large-cap companies pay dividends to their investors. Some of the top large-cap companies that pay dividends include Pfizer (PFE), Coca-Cola (KO), and IBM (IBM).
Stability is another important trait of businesses with a higher market capitalization. These businesses have solid foundations and have made a name for themselves as market leaders. These are essentially blue-chip stocks. These are businesses that have a history of steady growth and profitability and sound financial standing.
Due to their size, large-cap companies must by their very nature be well-organized. Their leadership boards and management teams frequently have many years of combined experience. One way to assess the strength and growth prospects of a large-cap firm is to consider the caliber of the management team.
Having a wealth of information readily available for investors to review and analyze is another trait of larger companies. For instance, earnings reports provide a level of transparency that can be beneficial when deciding whether to buy or sell a specific stock.
Large cap vs. blue chip stocks
Large-cap stocks and blue chip stocks are similar but not identical categories of stocks. The term “large-cap stock” strictly refers to the company’s market capitalization dollar value. Blue-chip stocks, in contrast, are a part of a broader category.
However, they typically come from established businesses that have a track record of reliable performance over an extended period of time, sometimes more than 100 years. They are regarded as trustworthy and very low-risk. They frequently yield positive returns.
Therefore, blue-chip corporations typically fall under the large-cap category. But not every large-cap company is a blue-chip.
For instance, Tesla, a manufacturer of electric vehicles, has become one of the mega-caps. However, because it is a young business with little financial stability in the past, it is not yet a blue-chip stock.
Within the asset class of equity, large cap stocks offer comparatively stable investment opportunities. They consequently give your investment portfolio stability. Prices of these stocks are generally less affected by market turmoil or a downward trend. A large-cap company has very little chance of going bankrupt or insolvent. As a result, during a market downturn, these stocks help to partially offset any losses you might sustain from other securities in your portfolio.
Investors receive dividends from large-cap companies. As a result, dividends provide equity investors with a consistent source of income. As a result, you may still benefit from the regular dividends even if the capital gains upon sale are not substantial. The absence of consistent returns from other investment types is compensated for by recurring dividends.
Public access to information about large-cap companies is simple. All large-cap companies are required to disclose/publish their financial statements and other information. Investors can easily analyze the business, trends, and future prospects of the company as a result. You can make wise investment decisions if such information is available and accessible. Additionally, you can compare various businesses using financial data to select the best stock for your investment portfolio.
- Capital appreciation
Currently, there is a high demand for large-cap stocks. Since these businesses have been operating for many years, investors have confidence in their performance and track record. They are a preferred investment option as a result. Because of this, stock prices are frequently high and out of reach for investors with limited resources.
The best investment options are large-cap stocks. They won’t take very drastic action in response to a downward or upward market trend. As a result, the capital appreciation might not be as high as an investment in mid-cap or small-cap stocks. Investing in large-cap stocks provides investors with consistent dividend payments and moderate returns.
Other Pros and Cons
Investors are drawn to large-cap companies because of their distinctive characteristics. Comparing these stocks to mid-cap or small-cap stocks, they are typically a safer investment. A large-cap company may have an advantage over smaller companies during times of market turbulence when it comes to weathering price changes or more significant changes in the economy.
When the economy is growing, these stocks may also perform better. This is due to the possibility that investors will be more willing to invest in bigger, more well-known companies. Large-cap companies can provide steady income regardless of the state of the economy if they can continue paying dividends to investors throughout different economic cycles.
Compared to mid or small-cap stocks, large-cap stocks have a tendency to be more transparent, which makes them simpler for investors to assess. If you want to determine how accurate the valuations are for a specific company, that is crucial information.
It may be more difficult to identify precise values, for instance, with newer businesses that have a shorter history. Purchasing an overpriced stock that later experiences a significant price decline is where the risk lies in this situation. If you want to change your position, selling large-cap stocks may be simpler.
When buying larger company stocks, as with any other investment, there are some potential drawbacks to be aware of. For instance, these stocks are typically not the best choice for investors seeking a quick buy-and-sell profit. They would work better with a buy-and-hold strategy. This entails purchasing shares and holding them over time in the anticipation of an increase in value.
This is connected to a different flaw that has to do with the return profile of large-cap stocks. In general, a stock’s return may be higher the more risk it entails. You might not see exorbitant returns the way you might with stocks of a different market cap because large-cap stocks are regarded as safer bets. In general, investing in them is more suitable if you want consistent returns and dividend income.
Their size is another factor that may work against larger businesses. It might be challenging to internally reorganize or redesign their business model in order to change course. If it causes them to lose some of their competitive edges, this might put them at a disadvantage in the market.
Who should invest in large-cap stocks?
For investors with a long investment horizon looking for steady growth in their equity portfolio, large-cap stocks are a good choice.
These stocks are less volatile than mid-cap or small-cap stocks and pay out regular dividends. You can thoroughly examine the stock before investing because information on large-cap stocks is readily available.
Your investment portfolio will become much more stable if you include large-cap stocks. Your investment portfolio will experience significant long-term returns if large-cap stocks are the focus.
In order to fulfill your long-term goals and objectives, you may want to think about investing in stocks. Your investment portfolio will be shielded from fluctuations by its track record of success and solid financial standing. Additionally, during a volatile market, you don’t have to worry about stock movements. You’ll be able to make significant long-term returns with the aid of these stocks. Before making an investment, it is suggested to conduct a thorough analysis of the stocks.
Which companies stocks are large-cap?
The following is a list of some large-cap stocks companies:
1. Reliance Industries Ltd.
2. Tata Consultancy Services Ltd.
3. Hindustan Unilever Ltd.
4. Infosys Ltd.
Are large-cap stocks better?
Yes, because large-cap stocks have a market capitalization of more than $10 billion, making them more stable and mature investments. As a result, they tend to have lower volatility, more analyst coverage, and possibly a consistent dividend stream compared to small-cap stocks.
Is large-cap high risk?
Large-cap funds are an equity investment type. Equity investments are typically thought to be high-risk investments. Large-cap funds, on the other hand, are considered less risky within the equity category because they invest in companies with a proven track record.
Are large-cap stocks risky?
Large-cap companies are generally a safer investment, particularly during a business cycle downturn, as they are much more likely to weather changes without suffering serious consequences. As a result, they become more appealing to investors, bringing in a steady flow of funds that helps to reduce their volatility.
When should I buy large-cap stocks?
Large-cap stocks might be a good fit if you can keep an investment for at least five years and want stocks with little volatility.
Nansel is a serial entrepreneur and financial expert with 7+ years as a business analyst. He has a liking for marketing which he regards as an important part of business success.
He lives in Plateau State, Nigeria with his wife, Joyce, and daughter, Anael.