Big-Caps That Are All the Rage

 | Sep 22, 2012 | 1:30 PM EDT  | Comments
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I have written a great deal about small caps lately -- but, for years, I've also emphasized the need to also incorporate large, liquid names within a portfolio.

As I was doing some research into ETFs earlier this week, I began running scans for stocks that are widely held in ETFs. Of course, there are some the usual suspects that turned up on several of my screens: Apple (AAPL), along with Dow components Exxon Mobil (XOM), Microsoft (MSFT), Chevron (CVX) and IBM (IBM).

But other widely indexed names -- ones that are components of various ETFs -- include some China-based big-caps. China Life Insurance (LFC), which has a market cap north of $81 billion, is an ETF favorite.

As a component of several China and emerging-market indices, it turns up as a top holding in the Invesco PowerShares BLDRS Asia 50 Index Fund (ADRA), the Guggenheim BRIC ETF (EEB), the ProShares Ultra MSCI Emerging Markets ETF (EET), and the PowerShares Golden Dragon China ETF (PGJ), among others.

The stock doesn't meet my normal growth-investing technical criteria, as it continues to trade well below its 18-month high. On a fundamental basis, the company has some potential. After a sharp drop in 2011, earnings are seen rising 15% this year, to $1.75 per share.  That number is expected to climb another 58% in 2013, to $2.77 per share.

Another widely indexed company is telecom China Mobile (CHL). Earnings and revenue growth have been slowing in recent quarters. The name, traded in American depositary receipts, skidded 7% on Aug. 16 on 4x average volume after disappointing first-half results.

Hong Kong-based China Mobile was once a much-vaunted growth play. A monthly chart shows a gain of 940% between May 2003 and October 2007. Since then, the stock has been mired in a long-term sideways trend. Last month, it cleared three-year resistance at $59.22 before turning tail after the semiannual report.

But the growth aspect is off the table -- for now, anyway. For 2012, analysts expect a year-over-year earnings decline of 3% to $4.70 per share. In 2013, earnings performance is expected to be essentially flat. A dividend yield of 3.5% is a lure to yield-seeking investors.

When it comes to a U.S.-based companies that figure prominently among ETF holdings, check out Simon Property Group (SPF), a real estate investment trust that owns and operates shopping malls and outlet centers around the country.

The stock has been trading in a sideways, flat pattern, despite this week's gap lower. It briefly surpassed resistance above $163.75, but pulled back before tumbling 3% Thursday on news that the company founder's estate would liquidate nearly 5.9 million shares in a resolution of a will-related dispute.

Not surprisingly, trading volume was more than triple normal levels Thursday. On Friday, it appeared bargain shoppers were beginning to nibble at the stock, as the price rose fractionally early in the session.

Simon has confirmed that it will report its third quarter Oct. 25. Wall Street is eyeing income of $1.92 per share, which would mark a gain of 12% from the year-ago quarter.

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