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This year, the rally has mostly been led by small-cap stocks as easy money encouraged investors to invest in higher-risk, higher-growth stocks. Further since the US economy appeared to have better outlook than many international markets, investors preferred domestically focused companies.

After the surge, smaller-cap stocks appear rather expensive. Russell 2000 ETF (IWM - ETF report) now has a P/E ratio of 29.6 compared with 21.9 for the Russell Top 200 ETF (IWL - ETF report).

Further, large-cap companies will benefit from the brightening global growth environment, as they derive almost half of their revenues from outside of the US. Also, most of these companies have huge cash piles on their balance-sheets and have been increasing dividends and buybacks. Going forward, they are likely to spend more on capital investments and hiring.

Another reason for investing in larger companies now is that many investors who continued to stay invested in bonds will begin to embrace stocks when they finally realize that the bull market in bonds is over. Being very risk averse, these investors tend to favor larger, stable, well-known companies over smaller riskier players

Do you think that large-cap stocks will outperform in 2014? 

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Zacks Releases Their 7 Best Stocks for May, 2014

These 7 were hand-picked from the list of 220 Zacks Rank #1 Strong Buys with earnings estimate revisions that are sweeping upward. Their stock prices are expected to rise sooner than the others.

Today, this Special Report is available to new Zacks.com visitors free of charge.

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Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%
INTERNATIONA ICAGY 33.30 +5.38%