In this article, we take a look at the 10 best large-cap stocks to buy. You can skip our detailed analysis of the large-cap stocks and go directly to read the Starter Stock Portfolio: 5 Large-cap Stocks To Buy.
Beginner investors tend to buy small- and mid-cap stocks as they are relatively affordable as compared to large-cap stocks. Historically, mid-cap and small-cap stocks have outperformed large-cap stocks. According to a report published by Baird, a financial services company, mid-cap stocks have outperformed the large-caps 75% of the time since 1999.
However, risks associated with small-cap stocks should be taken into account before investing. Large-cap stocks have outperformed small-caps during times of economic expansion. During the dot-com boom in the 1980s, S&P 500 topped Russell 2000 by 91% from 1983 to 1990. Similarly, in the first three months of 2020, the S&P 500 benchmark of large-cap stocks outperformed Russell 2000 by 20%, as reported by the foreign exchange company, CME Group.
In this regard, some of the notable stocks are Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and UnitedHealth Group Incorporated (NYSE:UNH).
Our Methodology:
Let’s analyze our list of the best large-cap stocks to buy. The companies mentioned below are large-cap stocks with a market cap above $10 billion. We took into account hedge fund sentiment, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
Photo by Markus Winkler on Unsplash
Why pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Starter Stock Portfolio: 10 Large-cap Stocks To Buy
10. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 58
Airbnb, Inc. (NASDAQ:ABNB), an American vocational rental company, was recently upgraded by Cowen to an Outperform rating, with a $220 price target. The firm’s analyst Kevin Kopelman expects to see a 20% growth in the company’s booking volume in 2022 as he considered lodging as a permanent upcoming trend. Airbnb, Inc. (NASDAQ:ABNB) is considered one of the most notable large-cap stocks to buy.
Renaissance Technologies is the largest shareholder of Airbnb, Inc. (NASDAQ:ABNB), with shares worth $107.8 million. Overall, 58 hedge funds tracked by Insider Monkey reported having stakes in the company in Q2, valued at $2.7 billion. The hedge fund sentiment was positive for Airbnb, Inc. (NASDAQ:ABNB) in Q2, as 52 hedge funds had stakes in the company in the previous quarter.
In Q2 2021, the gross bookings at Airbnb, Inc. (NASDAQ:ABNB) stood at $13 billion, versus the estimates of $11.19 billion. The stock is up 21.58% in 2021.
Like Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and UnitedHealth Group Incorporated (NYSE:UNH), Airbnb, Inc. (NASDAQ:ABNB) is one of the most notable large-cap stocks to buy.
Worm Capital LLC mentioned Airbnb, Inc. (NASDAQ:ABNB) in its Q2 2021 investor letter. Here is what the firm has to say:
“Throughout the quarter, you may have noticed that we averaged into a significant position in Airbnb (ABNB). Though the stock has been a relative underperformer since its February highs, we are highly confident about the company’s prospects and its ability to generate meaningful compounded returns over time.
Some history: We have been following Airbnb’s journey for several years, long before the company went public earlier this year. (In fact, nine years ago, in November 2012, Eric profiled the company for Inc.: “Airbnb Is Changing Travel.”)
Whenever we underwrite a new investment, we look for a few key attributes that help us determine the potential long-term value of a business, as well as its risks. In particular, we focus on management (Are they founders? Do they have skin the game? Are they playing the long game?), addressable market size (How big is the opportunity?), its relative growth and creativity to expand (Are they constantly innovating to make the product better for their customers?), margin expansion (Where can we find operating leverage in the model?), its status in the industry (Are they the dominant player? Can they take market share from incumbents?), business risks (What are we missing? Are customers dissatisfied? What do employees say?) and probably a dozen more elements that are critical to our process. It’s only then do we take out the pencils do the valuation work.
In short, ABNB fulfills pretty much every element of a business model we’re attracted to: First, it’s highly scalable marketplace-based business model that unites buyer and seller with observable flywheel effects. (This is an important observation, in that the platform creates significant economic value for millions of hosts who rely on Airbnb, which in turn attracts new hosts who identify the opportunity, which creates more inventory, which turn attracts more travelers, which attracts more hosts, and soon.) Second, it has a global focus with significant opportunities to expand its operating leverage; Third, its management—which is still founder-led—stands out to us as long-term thinkers capable of handling crisis, which the team demonstrated throughout the pandemic by dropping operating costs and turning the business into a more efficient, lean organization. (Like Churchill said: “Never let a good crisis go to waste.”)..”
9. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 63
Lowe’s Companies, Inc. (NYSE:LOW), an American home improvement retail company, reported solid earnings in Q2 2021, with a GAAP EPS of $4.25, beating the estimates by $0.30. The company stands ninth on our list of the best large-cap stocks to buy.
Pershing Square is the largest shareholder of Lowe’s Companies, Inc. (NYSE:LOW), with shares worth roughly $2 billion. At the end of June, 63 hedge funds tracked by Insider Monkey reported owning stakes in the company, up from 61 in the previous quarter. The total value of these stakes is over $4.9 billion.
Recently, UBS lifted its price target on Lowe’s Companies, Inc. (NYSE:LOW) to $250, while keeping a Buy rating on the shares. The firm’s analyst expects the company to generate healthy EPS growth in the next year as it repurchased stocks worth $9 billion in Q2.
Pershing Square Holdings Ltd. mentioned Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2021 investor letter. Here is what the firm has to say:
“Since the onset of the COVID-19 pandemic, Lowe’s has experienced a signifi cant acceleration in demand driven by consumers nesting at home, higher home asset utilization and the reallocation of discretionary spend. In the three years since Marvin Ellison became CEO, the company has executed a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities. This transformation has allowed Lowe’s to meet consumers’ needs during this highly elevated period of demand, and positioned the company for continued success and accelerated earnings growth.
In the second quarter, Lowe’s reported U.S. same-store-sales growth of 2.2%. Growth was bolstered by strength from the critical Pro consumer, where Lowe’s reported growth of 21%, off setting moderating do-it-yourself (“DIY”) demand. While DIY demand has receded from peak-COVID-19 periods, Pro customer demand has accelerated as consumers engage Pro’s for larger renovation projects.
Notwithstanding the headline growth fi gure, which is impacted by comparisons to COVID-19-aff ected months from spring of 2020, demand remains extremely elevated relative to baseline 2019 levels. July same-store-sales, the most recent full month for which the company has provided disclosure, were up 31.5% on a two-year basis and management indicated August month-to-date results are substantially similar. More signifi cantly, Lowe’s reported Pro growth of +49% on a two-year basis in Q2, evidence that Lowe’s focus on the Pro is bearing fruit. Share gains with the critical Pro customer will provide a tailwind to growth that should allow Lowe’s to outperform market-level growth going forward.
Even as the robust demand experienced during the height of COVID-19 stabilizes at a new base, the medium and longer-term macro environment remain very attractive for the home improvement sector and Lowe’s in particular. This favorable context for the sector is evidenced by consumers’ enhanced focus and appreciation of the importance of the home, higher home asset utilization, rising home prices, historically low mortgage rates, an aging housing stock, strong consumer balance sheets, and the general lack of new housing inventory.
Against this backdrop, Lowe’s is focused on taking market share and expanding margins. Pro penetration today is still only 25% of revenue as compared to Lowe’s medium-term target of 30% to 35%, providing a runway for continued abovemarket growth. Management continues to execute against various operational initiatives (Lowe’s “Perpetual Productivity Improvement” program) designed to improve the customer experience while enhancing the company’s margins and longterm earnings power. The company’s long-term outlook implies signifi cant opportunity for continued margin expansion and
earnings appreciation as it executes its business transformation.Lowe’s currently trades at approximately 17 times forward earnings. Home Depot, its closest competitor, trades at approximately 22 times forward earnings despite Lowe’s superior prospective earnings growth. We find this valuation disparity to be anomalous in light of Lowe’s strong execution and potential for further operational optimization.”
8. Pinterest, Inc. (NYSE:PINS)
Number of Hedge Fund Holders: 63
Pinterest, Inc. (NYSE:PINS) reported an 89% growth in average revenue per user (ARPU) in Q2, compared with the prior-year quarter. Pinterest, Inc. (NYSE:PINS) posted an EPS of $0.25, beating the market estimates by $0.12. The company ranks eighth on our list of the best large-cap stocks to buy. Founded in 2009, Pinterest, Inc. (NYSE:PINS) has grown to become one of the best large-cap stocks to buy.
This September, Brad Erickson of RBC Capital initiated the firm’s coverage on Pinterest, Inc. (NYSE:PINS) with a Sector Perform rating and a $58 price target, while maintaining a positive outlook for the company.
Alkeon Capital Management is the largest shareholder of Pinterest, Inc. (NYSE:PINS), owning over 4.5 million shares. Overall, 63 hedge funds tracked by Insider Monkey have positions in the company.
Carillon Town Advisers mentioned Pinterest, Inc. (NYSE:PINS) in its Q1 2021 investor letter. Here is what the firm has to say:
“Pinterest is an operator of a pinboard-style social media website that enables users to create theme-based image collections for events, hobbies, and other personal interests. The firm delivered another quarter of both earnings and forward guidance above investor expectations, sending shares higher. Strength was driven by notable user growth and a return of advertising spending. We remain excited about an increase in video content, new analytics tools for advertisers, and an increasing shift towards ecommerce.”
7. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 64
In September, Goldman Sachs appreciated the impressive growth of Snap Inc. (NYSE:SNAP) over the years. The investment bank lauded the company’s dominant position in augmented reality (AR) and expects its revenue to grow at a CAGR of 48% through 2023. The firm lifted its price target on Snap Inc. (NYSE:SNAP) to $90, with a Buy rating on the shares.
In Q2 2021, the company reported the highest revenue in four years at $982 million, up 116% from the same period last year and beating the analysts’ expectations by 16%.
Of the 873 elite funds tracked by Insider Monkey, 64 hedge funds were bullish on Snap Inc. (NYSE:SNAP) in Q2, with stakes valued at $5.3 billion.
RiverPark Funds mentioned Snap Inc. (NYSE:SNAP) in its recently published Q2 2021 investor letter. Here is what the firm has to say:
“Snap shares were a top contributor for the quarter as well, also driven by strong first quarter results. The company reported accelerating revenue growth of 66% for the period (up from 62% fourth quarter growth), driven by user growth of 22%, and a 36% expansion in average revenue per user (ARPU). The company also guided to stronger-than-expected and accelerating 81%-85% revenue growth for second quarter 2021. Adjusted EBITDA improved by $79 million year over year for a break-even margin, up 1,800 basis points, and free cash flow improved dramatically, turning positive for the period to $126 million. Snap also continued to roll-out products that should help drive further expansion in user growth and ARPU, including Spotlight, a TikTok-like experience, with more than 125 million Snapchatters using it during March, and original programming starring Ryan Reynolds.
With TTM of $2.8 billion in revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, we believe Snap has a long runway for both revenue growth and expanded profitability as it improves its platform functionality, grows its audience, and continues to advance its monetization.”
6. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 66
CrowdStrike Holdings, Inc. (NASDAQ:CRWD)’s subscriptions have gone through the roof, jumping from 7% to 66% in the past four years. In Q2 2021, the company posted an EPS of $0.11, beating the estimates by $0.02. With a market cap of $63.6 billion, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is one of the best large-cap stocks to buy now.
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a cybersecurity technology company, based in California, U.S. Tiger Global Management LLC is the largest shareholder of CrowdStrike Holdings, Inc. (NASDAQ:CRWD), with shares worth over $1.8 billion. In addition to this, 66 hedge funds tracked by Insider Monkey have stakes in the company in Q2, down from 77 in the previous quarter. These stakes are valued at $7.2 billion.
This September, BTIG lifted its price target on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) to $313, while keeping a Buy rating on the shares. In the past year, the stock gained 88.7%.
Carillon Tower Advisers mentioned CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q2 2021 investor letter. Here is what the firm has to say:
“CrowdStrike provides cloud-based software solutions used in the security of computers, servers, and mobile phones. The company delivered revenue that came in above expectations and provided strong guidance as protection of enterprise assets and cloud workloads from cyber attacks remains top of mind for enterprises of all sizes. This ongoing dynamic should continue to result in a robust demand environment for CrowdStrike’s innovative products and services.”
Click to continue reading and see Starter Stock Portfolio: 5 Large-Cap Stocks To Buy.
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Disclosure. None. Starter Stock Portfolio: 10 Large-cap Stocks To Buy is originally published on Insider Monkey.
