Trading stocks may be exciting. Yet oddly enough, it is often the most boring stocks that make money consistently.
Let's talk about four major positives tied to Large Cap stocks -- that is, those with stock market capitalizations above $5 billion plus.
1) Big companies usually own the most attractive revenue and profit fundamentals. Their underlying businesses gain traction with major revenue footprints. These firms operate multiple lines under experienced management teams. Their products and services deploy well-known -- high margin -- corporate brand names.
2) Stocks tied to big companies are much less prone to unseen wickedness. They can't be easily rocked by broad stock market dips, scary news headlines, or suffer much from unforeseen foibles found with a single business line.
3) Unlike small caps, large cap stocks usually pay nice dividends and management increases them over time, as their underlying advantages gel into bigger profits.
4) Major company earnings growth, after the passage of the recently lowered corporate profits tax, delivers an exemplary and current catalyst for big share buybacks.
For example, the second quarter of 2018 -- the one we are currently in -- the estimated earnings growth rate for the large cap S&P 500 index is +18.9%. If 18.9% is indeed delivered, it will mark the 2nd highest earnings growth since the first quarter of 2011.
For the year, the S&P 500 is looking at +19.6% annual earnings per share growth. In other words, without any rise in stock market valuations, the opportunity for a big leg up in large cap stocks -- later this year or early next year -- is in place.
For all of these reasons, and a few others, Large Cap stocks are usually regarded as low risk payoffs. In simple terms, Large Cap stocks are more comfortable and conservative and, yes, they can be a little boring.
Let me sum it up for you. A Large Cap stock portfolio should be your CORE profit-making tool.
• Large Caps protect equity portfolios from too much share price volatility.
• Large Caps offer a conservative approach, great for a Late Cycle stock market like this one.
Yet, excitement is available with Large Caps -- for those traders who dig further.
More . . .
Large Cap Stocks Can Bring Big Gains and Sounder Sleep
Large Cap stocks offer greater resistance to volatility. They're less likely to be rocked by market dips, scary headlines or the loss of a single business contract.
Yet some of these big, stable companies are little known and still have significant growth potential. Our unique strategy uncovers these stocks with strong Zacks Rank fundamentals that are poised to start fast as well as climb high.
For example, we closed a gain of +112.4% in under 4 months. If you'd like to see the latest stocks in our portfolio there's a special advantage for doing so by midnight Sunday, June 24.
Look Into Zacks' Best Large Caps Now >>
THE FINEST REASONS POINT TO GLOBAL LARGE CAPS
Let's face it. This is one of the longest bull markets in history. Admittedly, the U.S. can experience a new recession. Think about the U.S. Internet and Subprime housing busts. Tack on any number of plain vanilla event-driven global pullbacks, corrections, and regional recessions that hit.
When U.S. and global equity market conditions turn bearish, where do you turn? Well-selected, less risky Large Cap stocks are a clean answer. They can hold onto substantial wealth.
Diversification is a core idea to any Asset Allocation Theory. A great one was put forth by 1990 Nobel Prize winner Harry Markowitz. He recommended 30% of an investor's portfolio be devoted to non-U.S. stocks. The rest should go into U.S. stocks -- with mostly Large Caps in each of those buckets.
70% of global equities which trade over $100 million or more each day are U.S. stocks: Most of these are Large Caps! Outside U.S. listings, many big foreign multinational companies can offer shares to you at substantial discounts, and they can capture new sources of profitable revenue growth.
For instance, think about companies benefitting from the economies of Israel, Mexico, India, and China, which grow +3% to +7% a year. U.S. real GDP should grow +2.9% a year in 2019. We can always find Large Cap stocks consistently growing earnings +10% to +12% a year.
In recent years, Large Cap share prices have gone up much faster than real earnings growth. That shows you the deep buying interest.
In sum, U.S. Large Caps should get most of your focus in a diversified portfolio.
A diversified Large Cap stock portfolio-trading tool offers you a surprisingly nimble means to profit across these multiple stock exchanges. Such a Large Cap stock selection service can think and act "Globally" -- buying and selling U.S. and non-U.S. stocks.
And due to the growing use of passive Exchange-Traded Funds [ETFs], and to much greater trading liquidity, investing institutions put more of their money to work on Large Caps. That's another stock market advantage to exploit.
These stock selection benefits are very, very real.
TOP ZACKS STOCKS SHOW YOU STRONGER BOTTOM-LINE PROFITS
The Large Cap's powerful incentives endure. Looking solely into the Large Cap stock universe means we can focus and find strong companies, ones that have the most thorough public analyst coverage.
Successful Large Cap stocks will surely be located in broad industry niches booming several times faster than the U.S. or the global economy. We can identify the most active shares, deploying the Zacks Industry Rank tool.
A durable example remains the Semiconductors. Many of the 36 companies in this high-growth industry secure a top Zacks Rank.
One final, subtle truth lingers with the Zacks Rank. Our specific share price signals work best with more than 3 covering analysts. Large Cap stocks ALWAYS offer you that deep analyst coverage.
YOUR LARGE CAP PORTFOLIO OPPORTUNITY AWAITS
When it comes to Large Cap Stocks, there is no 'devil in the details'. No Large Cap recommendation looks "exotic". Large Cap shares are not complicated to buy. Large Cap stocks can be easily traded via any brokerage account. And select Large Cap stocks can significantly boost a portfolio's profit potential.
Traders just have to know exactly where to look. And exactly when to make moves.
That's where my Zacks Large-Cap Trader portfolio can help. I apply Zacks Rank timeliness to enhance stock buys and sells over extended intervals of 3 to 6 months.
On top of identifying the best revenue expansion & profit growth trends, via quantitative Zacks earnings estimate revisions -- updated daily -- this service can identify contrarian and relative-value opportunities to mine for added profits.
Our Large Cap stocks offer exceptional, conservative profit potential when approached, selected, and monitored with a precise "edge" -- like the enduring Zacks Rank. A strong rating increases their chances for starting fast as well as climbing high. For example, we closed a gain of +112.4% in under 4 months.
Today, I invite you to look inside Zacks Large-Cap Trader portfolio. I'm getting ready to pull the trigger on a few new stocks and will alert you to the where's and when's so you can trade alongside me as we pursue maximum profits.
Another reason to get started today is that you can also download Zacks' just-released Special Report: 7 Best Stocks for the Next 30 Days. From 220 Zacks Rank #1 (Strong Buy) stocks, our experts picked these 7 as most likely for immediate breakout. But don't delay as this bonus opportunity ends midnight Sunday, June 24.
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Wishing the best to you and your trades!
John Blank, PhD, is Chief Equity Strategist at Zacks. His daily global commentary and top stock recommendations are available in Zacks Large-Cap Trader.