Investing

The Ultimate Large Cap Portfolio to Buy and Hold Forever

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.

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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.

Walt Disney Co. (NYSE: DIS) is the largest market cap name in the consumer discretionary sector, and it is pushing hard to gain fans in China. The company has struck a multiyear deal with one of the same Chinese media companies with which DreamWorks has a deal, Shanghai Media Group, to begin producing content specifically for a Chinese audience. Disney as a company is not new to working in China. Disneyland Hong Kong has been operating since 2005. Investors are paid a 1% dividend. The consensus price target is $88.54. Shares of Disney were trading late Friday at $82.65.

General Electric Co. (NYSE: GE) has lagged the rally over the past year and may provide investors a solid entry point. With multiple revenue-producing divisions making everything from appliances, engines, water treatment facilities and almost everything in-between, the company employs more than 300,000 people. It also has the largest market cap in the industrials sector. The iconic company trades at a low 15 times forward earnings. Investors are paid a very solid 3.2% dividend from the blue chip name. The consensus price objective is $28.90. GE was trading late on Friday at $26.97.

Johnson & Johnson (NYSE: JNJ) is the top market cap name in the health care sector. With everything from medical devices to over-the-counter health items and prescription drugs, it remains one of the most diversified health care names on Wall Street. Investors are paid a 2.7% dividend. The consensus price target for the stock is at $105.02. Johnson & Johnson shares were trading at $102.30 late on Friday.

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Berkshire-Hathaway Inc. (NYSE: BRK-A) is not only the largest cap stock in the financial sector, it gives investors the ultimate way to own a basket of public and private names that few, if any investment vehicles can. It is run by the legendary Warren Buffett, and investors have reaped the benefits of his genius for more than 50 years now. Transition concerns have popped in recent years as the beloved investment guru has aged, but many bright, younger managers have been brought in to guide the ship into the investing future. The consensus price target was not available. The B class shares of Berkshire Hathaway were trading at $126.77 late on Friday.

Monsanto Co. (NYSE: MON) is the largest market cap stock in the materials sector. The company is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality. Monsanto remains focused on enabling both small-holder and large-scale farmers to produce more from their land while conserving more of our world’s natural resources such as water and energy. While the venerable company has been under fire lately, its long-term outlook is solid. Shareholders are paid a 1.4% dividend. The consensus price target is $131.55. Monsanto was trading late on Friday at $119.80.

Verizon Communications Inc. (NYSE: VZ) is the large cap leader in the telecommunications sector. The stock is also becoming the new darling of Warren Buffett and many of the top hedge funds. Berkshire Hathaway recently disclosed a $528 million purchase of the stock. He was followed by hedge fund managers Kyle Bass and John Paulson, who also bought the stock. Investors are paid an outstanding 4.3% dividend. The consensus price target is $53.85. Verizon shares were trading at $49.21 late Friday afternoon.

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Duke Energy Corp. (NYSE: DUK) is the largest market cap stock in the utility sector, which has performed outstanding this year. The stock is one of the leading U.S. utility companies, given its stable earnings base, and a significant portion of the company’s earnings are derived from regulated operations. Also, the company has delivered a healthy financial performance in the past and remains an attractive option for income-seeking investors. Investors are paid an outstanding 4.3% dividend. The consensus price target is $76.12. Shares of Duke Energy were trading at $70.75 late on Friday.

If investment success was as easy as owning the biggest companies in every sector, which is just what many large cap mutual fund managers do, then everybody would do it. This is a slightly different twist in owning the absolute biggest name, and only one from each sector. One thing is for sure, it would be a jaw-dropping event if any of these top companies ever went out of business. That makes them absolutely solid investment choices.

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