Almost every firm that we cover on Wall Street seems to agree that the best class of stocks to own going forward is the large cap leaders. In fact, a new report from the Portfolio Strategy team at Oppenheimer makes the case that large cap names are the only place to be now and going forward. Their observation is that small caps have continued to underperform since peaking in mid-March.
In addition, Oppenheimer’s cyclical indicators, as well as relative valuations, argue that the trend could continue. Their proprietary model has been decisively in favor of large caps for nearly a year now, and they maintain that most of the indicators are unlikely to change signals any time soon.
With many sectors at top valuations, and a potential pullback perhaps already starting, investors may want consider owning the biggest of the big stocks in every sector. Oppenheimer broke out the sectors in the report, and they broke out the leaders by market cap.
Apple Inc. (NASDAQ: AAPL) is the largest market cap stock in the technology sector, and it just completed a historic and massive seven-for-one stock split. Excitement over the new iPhone 6 is starting to gain traction as rumors of a larger screen and other new improvements are getting the Apple nation stirred up. Plus, with a huge earnings beat, the stock split, an increased dividend and share buyback, the company seems right back on their game. Trading at just 12 times forward earnings, the stock remains a solid tech part of a portfolio. Shareholders are paid a 2% dividend. The Thomson/First Call price target for Apple is $93.45. Apple was trading at $91.48 late on Friday.
Exxon Mobil Corp. (NYSE: XOM) is the biggest natural gas producer and is also the country’s biggest oil company. It is one of the most profitable corporations in the world and the largest market cap company in the energy sector. Exxon has operations in every continent but Antarctica. Its oil and gas operations range across several states, from Pennsylvania to Colorado, and it also has wells in the Gulf of Mexico and off the California coast. Exxon produces nearly 50% more gas than its closest competitor. Daily production is over 3.5 billion cubic feet. The stock pays investors a 2.7% dividend. The consensus price target for the stock is $101.21. Exxon shares were trading late Friday at $102.37.
Wal-Mart Stores Inc. (NYSE: WMT) is the largest cap name in the consumer staples sector. While the company recently acknowledged that food-stamps were a contributor to earnings, it is also an expanding discount leader that will benefit from an improving economy. Plus, its increasing presence in the grocery world is adding to an already large retail footprint. A push to sell organic products is also starting to gain market share from some of the traditional leaders of that space. Investors are paid a 2.5% dividend. The consensus price objective is $80.52. Walmart shares were trading late Friday at $75.21.