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or those interested in investing in individual stocks, it can be hard to know where to start. There are so many ways to slice and dice the market. But one initial way to segment a universe of securities to ensure a portfolio of diversified investments is by market capitalization or “market cap.” Read on to learn some of the advantages to investing in large-cap securities and to get insight on four large-cap stocks with potential in 2024. As always, investors should do their own research before investing.
Understanding Large-Cap Stocks
The market cap of a stock is the total market value of a company's outstanding shares of stock. It is calculated by multiplying the current stock price by the total number of outstanding shares for a company. For example, IBM
“Large-cap” stocks refer to shares of companies with large market capitalizations. These stocks frequently hold top positions in broad market indices such as or Dow Jones Industrial Average.
The classification of stocks into large-cap, mid-cap or small-cap is based on their market capitalization or size. While specific definitions can vary, a large-cap stock is generally defined as a company that has a market cap of more than $10 billion. Mid-caps have market caps ranging from $2 billion to $10 billion and the market cap of small-caps range from $300 million to $2 billion.
Implicit in these size categories are a few key characteristics, primarily: volatility, growth potential and income opportunities. Small- and mid-cap stocks tend to have a higher risk and volatility compared to large-cap stocks but may offer greater growth potential. However, small- and mid-caps can also be more sensitive to economic fluctuations and, as a result, might see a wider variety in price swings impacting portfolio level volatility. Large-cap stocks are also characterized by their liquidity, so investors can expect to purchase and offload shares without significantly impacting the stock price.
It's important to note that while large-cap stocks offer certain advantages, they also have risks. Industry-specific challenges and other factors can affect the performance of even the largest companies. Large-cap companies can also have an outsized presence in broad-based equity ETFs, which can be an issue when investors sell those types of stocks en masse.
Methodology Used For These Picks
To arrive at the four stocks on this list, I filtered for stocks with market caps in excess of $50 billion. I then reviewed a variety of fundamental, quantitative and technical indicators, including the ones summarized in this article for each stock. Generally, I focused on stocks that have lagged the market leadership in the past year, which have been primarily the "Magnificent 7" tech stocks (Alphabet, Amazon
Those seven stocks were automatically excluded, since I am concerned they are so overvalued, they are priced for "perfection" as they say on Wall Street. Instead, I wanted to identify fundamentally strong businesses, each in a different market sector, with emphasis on stocks that I judged to have a better combination of reward potential versus risk of major loss over the next year.
The brain trust at Forbes has run the numbers, conducted the research, and done the analysis to come up with some of the best places for you to make money in 2024. Download one of Forbes' most popular and widely anticipated reports, 12 Best Stocks To Buy for 2024.
The 4 Best Large-Cap Stocks For 2024
1. The Procter & Gamble PG
- Sector: Consumer Staples
- Industry: Household Products
- Market cap: $357.9 billion
- EPS (FWD): 6.43
- Dividend Yield (FWD): 2.5%
Company Overview
PG is no newcomer. The company started a generation before the U.S. Civil War, back in 1837. Today, Procter & Gamble is one of the world’s biggest manufacturers of consumer products, with more than $80 billion in annual sales. PG’s iconic brands include Tide, Charmin, Pampers, Olay, Crest. Gillette, Pepto and many more. The company operates in five sectors: baby, feminine and family care; beauty; healthcare; grooming; and fabric and home care. It is a global business, with non-U.S. sales slightly exceeding those in PG’s U.S. domestic market.
Why PG Is A Top Pick
PG made my list for several reasons, including my belief that the stock market’s gains have been too concentrated in the technology sector. PG’s leadership in the consumer staples sector should make it a less cyclical, more defensive stock going forward. PG has increased its dividend payout per share every year for 67 years, and the “dividend aristocrat” has paid a dividend for a remarkable 133 years. Shifting macroeconomic conditions such as moderating interest rates and a normalized inflation could play into PG’s favor in the years ahead, as consumers feel less stretched and return to pre-inflation spending patterns.
2. ExxonMobil XOM
- Sector: Energy
- Industry: Integrated Oil & Gas
GAS - Market Cap: $398.1 billion
- EPS (FWD): 9.29
- Dividend Yield (FWD): 3.8%
Company Overview
XOM is known to anyone in the United States that has ever pumped gas. But this giant energy company is more than just service stations. It is an integrated oil and gas company involved in exploring for, producing and refining fossil fuel around the world. XOM is the world's largest oil refiner, and is also a global leader in the manufacturing of commodity and specialty chemicals.
Why XOM Is A Top Pick
Exxon has a few distinct advantages versus its peers. Optimism
Another positive for XOM is the pending acquisition of Pioneer Natural Resources
The brain trust at Forbes has run the numbers, conducted the research, and done the analysis to come up with some of the best places for you to make money in 2024. Download one of Forbes' most popular and widely anticipated reports, 12 Best Stocks To Buy for 2024.
3. Illinois Tool Works (ITW)
- Sector: Industrials
- Industry: Industrial Machinery & Supplies
- Market cap: $77.8 billion
- EPS( FWD): 9.75
- Dividend Yield (FWD): 2.2%
Company Overview
ITW is one company that often flies under the radar because its business does not manifest itself in a way that consumers can easily see. This is the nature of many industrial businesses. ITW is a diverse, global producer of industrial equipment, consumables and related services. Its 87 global divisions are grouped into seven different segments: automotive, construction, food equipment, specialty products, test/measurement and electronics, polymers and fluids, and welding. ITW’s revenue is generated about evenly from the U.S. and from countries outside of the U.S.
Why ITW Is A Top Pick
ITW is a consideration for those seeking income generation in a sector that outperformed in 2023–industrials. While not traditionally thought of as a growth investment, ITW has posted a favorable gross profit margin relative to its peer group, and a reasonable dividend payout ratio at 51%. The company’s diverse set of businesses and industries served can help to smooth out results over time.
4. Cisco Systems CSCO
- Sector: Information Technology
- Industry: Communications Equipment
- Market cap: $208.5 billion
- EPS (FWD): 3.88
- Dividend Yield (FWD): 3.0%
Company Overview
Cisco is the world’s largest networking equipment and software company in the world. It is also a leader in contemporary business areas like cybersecurity. Webex product line and observability tools promote stronger communication to companies across the globe. Eighty thousand employees strong, CSCO has a large global footprint and serves a diverse customer base, including large corporations and governments. The modern internet was shaped in large part by CSCO’s efforts, and it continues to be a major player in the networking and technology industry.
Why CSCO Is A Top Pick
CSCO is a rarity when compared to the “Magnificent 7” in that it is a technology stock that offers both value and the potential for income. And, its efforts to diversify revenue streams with subscription-based software could be a future source of profit growth. Back in September, CSCO announced its plans to acquire Spunk (SPLK), which will add additional cybersecurity capabilities to the company’s portfolio. This deal is anticipated to close in the second half of 2024, but could be closed sooner. CSCO’s low forward P/E ratio of 13.2, which is well below the average for its sector, also indicates that this could be a good value play as well.
Important Investing Considerations
It is important that investors always consider a given investment within their defined financial goals and objectives. Important considerations include risk tolerance, time horizon, diversification, and costs and fees among others. The investment landscape is always evolving, as such staying current with shifting conditions is critical to any investment process.
Bottom Line
In this article are four large-cap stocks that may provide investors with distinct size advantages such as stability and dividend income. I’ve also aimed to provide alternative names to the narrow leadership that has dominated the market in the recent period. As always, every self-directed investor should take in views and research and make their own, independent decisions.
Read Next
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The brain trust at Forbes has run the numbers, conducted the research, and done the analysis to come up with some of the best places for you to make money in 2024. Download one of Forbes' most popular and widely anticipated reports, 12 Best Stocks To Buy for 2024.
