Mega-cap companies are those that have market caps over $200 billion. Investors love these stocks because companies that big tend to know how to do business. They also tend to have relatively stable growth and, in spite of their large sizes, tend to have strong upside. We like the technology and energy sectors the most. We think technology stocks are undervalued overall, and we like energy stocks because they are still in a bull market, yet the valuations are still cheap. Here are seven such mega cap stocks you need to have in your portfolio. They need no introduction – you probably know these names and use their products everyday.
Apple (AAPL) closed trading December 14 at $380.19, or 13.74 times its current earnings, with a one-year target estimate of $508.83. Over the last five years, AAPL’s earnings grew 61.14%. While analysts expect its earnings growth will be a little less (18.62%) over the next five years, AAPL is still expected to top its industry’s earnings growth forecast of 13.34%. Both Ken Heebner and Andreas Halvorsen opened new positions in AAPL during the third quarter.
Chevron (CVX) was trading at $100.53. It is priced at 7.45 times its earnings and carryies a one-year target estimate of $122.55 a share. In addition to the upside, CVX also pays a $3.24 dividend (3.10% dividend yield). It is also really stable. Its earnings have increased 7.02% per annum for the last five years and are expected to increase by 6.45% per annum for the next five. Phil Gross and Robert Atchinson’s Adage Capital Managementhad over $311M invested in CVX at the end of the second quarter.
Google (GOOG) closed trading on December 14 at $618.07 a share, or 21.07 times its earnings. It has a one-year target estimate of $730.91. Over the last five years, GOOG’s earnings have increased by 25.41% per annum. Analysts predict GOOG’s earnings will continue the double digit increase. They forecast its earnings will increase by 19.09% per annum over the next five years. In the third quarter, Julian Robertson, John Griffin and Jean-Marie Eveillard each increased their funds’ positions in GOOG.
International Business Technologies (IBM) was trading at $188.72 when the market closed on December 14. It had a P/E ratio of 14.87 and a one-year target estimate of $196 a share. In addition to the upside, IBM also pays a $3.00 dividend (1.60% dividend yield). Over the last five years, IBM earnings have upped 16.19% and are expected to increase by 11.01% over the next five years. Warren Buffett is a recent fan of IBM.
Microsoft (MSFT) closed trading December 14 at $25.59 a share, at 9.30 times its earnings, with a one-year target estimate of $30.93. MSFT also pays an 80 cent dividend (3.10% dividend yield). MSFT’s earnings have grown by 13.22% per annum over the last five years. Analysts expect they will increase by 9.69% per annum over the next five years. Leon Cooperman bought a new stake in MSFT during the third quarter.
PetroChina (PTR) was trading at $117.77 when the markets closed on December 14, or 9.73 times its earnings. It has tremendous upside potential; analysts have given it a one-year target estimate of $151.33. PTR also pays a $4.54 dividend (3.80% dividend yield). Over the past five years, PTR’s earnings have grown just 0.69%, but analysts predict its earnings will grow by 8% per annum over the next five. Jim Simons’ Renaissance Technologies had more than $37 million in the company at the end of the second quarter.
Exxon Mobil (XOM) closed trading at $79.44 on December 14, or 9.59 times its earnings. It has a one year target estimate of $91.32 and pays a $1.88 dividend (2.30% dividend yield). Over the last five years, XOM’s earnings have shrank -1.02% per annum but analysts expect its earnings will increase by 8.75% over the next five. T. Boone Pickens initiated a new position in XOM during the third quarter.
Disclosure: I am long MSFT.
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