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2 Great Large Cap Stocks to Buy On Sale in June

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There are plenty of fantastic large-cap stocks on sale right now that long-term investors might want to start buying in June and beyond.  

With the debt-ceiling deal almost done, Wall Street could begin to focus more on the fact that the stellar 2023 performances of Nvidia, Meta, and the other biggest tech companies on the planet have papered over the rather mundane showing from most of the S&P 500. Investors who can stomach the possibility of more near-term downside should start looking around for all the deals out there in the market right now.

The best investors don’t need to try to call bottoms on individual stocks. Instead, investors with long-term horizons should search for proven companies trading at rather attractive levels by their own historical standards.

Some of the best times to buy established giants are when they are seemingly ice cold. Investors are often bullish to buy stocks at what might soon prove to be the near-term peaks and very nervous to buy strong stocks at levels that will likely look ‘cheap’ years from now.

Here are two large-cap stocks that have more than doubled the S&P 500 over the past 20 years that boast proven business models that should thrive for years to come. Both stocks are also trading at prices and valuations that make them potentially attractive long-term buys right now.  

NextEra Energy ((NEE - Free Report) )

NextEra Energy operates one of the largest electric utilities, Florida Power & Light Company, in the U.S., which services over 12 million people. NEE is also one of the biggest producers of wind and solar energy on the planet.

NextEra is a battery storage leader as well, and it is exposed to the potential long-term upside of nuclear power. The company combines the huge growth potential of renewable energy and the stability of an electric utility.

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NEE boasts a roughly $150 billion market cap and it is the largest holding in the Utilities Select Sector SPDR ETF (XLU). NextEra expanded its contracted renewables and storage backlog in the first quarter to boost its total backlog to roughly 20.4 gigawatts.

NEE reaffirmed both its 2023 earnings guidance and its long-term financial outlook, which includes strong bottom-line expansion and dividend growth. NextEra’s dividend currently yields 2.6% and it has raised its payout by an average of 11% annually over the past five years.

NextEra’s revenue is projected to grow by 26% in FY23 to $26.48 billion and then climb 8% higher next year to help boost its bottom line by 7% and 9%, respectively, based on Zacks estimates. NEE’s FY24 earnings outlook has risen steadily since early 2022 and it has consistently topped our EPS estimates in recent years. Plus, nine of the 13 brokerage recommendations Zacks has for NEE are “Strong Buys,” with no “Sells.” 

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NEE stock has climbed by 270% in the past decade and 770% in the last 20 years, with a total return of roughly 1,500% vs. the S&P 500’s 330% run over the last 20 years and 575% total return. This outperformance includes over two years of recent sluggishness, highlighted by some big up and down moves. NextEra currently trades around where it was in September of 2020 and over 20% below its records.

The downturn has NEE trading 33% beneath its highs at 22.8X forward 12-month earnings and not too far above its decade-long median. NextEra is flirting with some potentially worrisome technical levels. But it could be poised to break out of its slump at some point and possibly reward investors who are thinking about holding the stock for year and years to come. NextEra currently lands a Zacks Rank #3 (Hold).

Home Depot ((HD - Free Report) )

Home Depot stock has fallen around 30% from its records as Wall Street began to price in slowing demand after the pandemic home building and improvement spending bonanza. The home improvement power posted 20% revenue growth in FY20 and over 14% higher sales in FY21 vs. an average of around 6% top-line growth during the five prior years. Meanwhile, its adjusted earnings surged by around 17% and 29%, respectively.

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Home Depot was never going to be able to keep up that scorching pace as the economy returned closer to normal. Yet sales still popped 4% in 2022 to help boost by adjusted earnings by 7%. Home Depot then provided somewhat disappointing fiscal 2023 guidance when it reported its Q1 results on May 16.

In fact, HD warned that its annual sales would fall for the first time since 2009. Zacks estimates call for Home Depot’s revenue to slip by 3.5% from $157 billion to around $152 billion and then pop 2% to $155 billion in FY24. Meanwhile, its adjusted earnings are projected to slip by 10% in 2023 and then bounce back to the tune of a 7% gain next year.

Home Depot’s longer-term outlook remains intact since Millennials are now driving the housing market and Baby Boomers are finally retiring and moving. Plus, home builders didn’t overbuild during the covid boom, which means there is plenty of upside. And the average home in the U.S. is growing older, likely leading to more repairs and remodels.

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Home Depot lands a Zacks Rank #3 (Hold) right now and its earnings outlook for FY24 is only down by around 5% since its Q1 report. Fourteen of the 24 brokerage recommendations Zacks has for HD are “Strong Buys,” with no sell ratings. And its Building Products – Retail space lands in the top 7% of over 250 Zacks industries. Home Depot’s dividend yields 2.9% at the moment and it has raised its payout by 15% on an annualized basis over the past five years.

HD shares have climbed around 266% in the last decade and 1,100% in the past 15 years to blow away the S&P 500’s 240% 15-year move and its Zacks Econ Sector’s 300%. Home Depot is currently neck-and-neck with the benchmark in the trailing five years, with it down 8% in the past two.

HD stock is trading around where it was in the summer of 2020. Home Depot is also trading at an 8% discount to its own 10-year median at 18.5X forward 12-month earnings.

(Disclosure: Ben Rains owns NEE in the Zacks Alternative Energy Innovators service

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