Forget the Needle in the Haystack -- U.S. Mega Caps are Hiding in Plain Sight
The flight to quality isn’t confined to U.S. Treasuries. It turns out big U.S. blue chips are also getting some safe(r) haven love amid global economic and market turmoil. Big multinational U.S. firms have been outperforming of late, and even better, many mega caps are trading at below-market valuations. Big is better these days, and you don’t necessarily have to pay up to get it.
Toss in a ETF that holds large, mid and small cap U.S. stocks-Vanguard Total Stock Market (VTI)-and the outperformance for the mega caps is even larger:
One more comparison: the year-to-date performance of mega caps is more than double the return of global small caps (Vanguard FTSE All World Small Cap (VSS))
Using the YChart Stock Screener, it turns out a who’s who of big boys earn the “Attractive” rating and sell at below-market price/earnings levels. Energy firms dominate the list: Exxon Mobil, Conoco-Phillips (COP), Royal Dutch Shell (RDS.B), and Chevron (CVX) deliver big Treasury-beating yields with p/e levels below 10.
Caterpillar (CAT) also makes the sub-10 p/e. And so far, this big boy isn’t showing signs that orders are slowing significantly amid global growth concerns.
Filed under: Company Analysis