A Trio of Fine Large-Caps

 | Dec 13, 2012 | 4:15 PM EST  | Comments
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Stock quotes in this article:

wfm

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bbby

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cvx

Year to date, we've seen a robust 13% rise in the large-cap index S&P 500. Sure, the index has seen significant support from Apple (AAPL), which has reaped a 34% gain for 2012. But, even discounting this, the S&P has enjoyed a double-digit increase for 2012.

I am not a soothsayer, and I do not profess to know how well large-caps will do in the coming year, but at this point I see no signs of a slowdown anytime soon -- so let's take a look at a few large-cap stocks, or those with more than $10 billion in market capitalization, that look well-priced and worth considering as portfolio additions.

When I choose stocks to recommend, I rely on my guru strategies -- computerized stock screens I created that mirror the investing methods of some of Wall Street's greatest minds. One such investor is noted financial theorist, analyst and mutual-fund manager James P. O'Shaughnessy.

My O'Shaughnessy-based strategy favors the nation's largest retailer of organic and natural foods, Whole Foods (WFM), which has more than 340 stores spread around the U.S., Canada and the U.K.

The O'Shaughnessy growth strategy likes Whole Foods' large market capitalization of $16.8 billion; its earnings-per-share increases for each of the last five years; and its reasonable price-to-sales ratio -- the latter of which shows the stock is a good buy. The strategy then takes all the companies that have passed the previous tests and picks the top 50 based on their relative strength, which is a gauge of how well a stock has performed relative to the market during the past year. With a reading of 80 here, Whole Foods makes it into this elite group.

Another retailer worth looking at is home-furnishings maven Bed Bath & Beyond (BBBY), which is preferred by a strategy I modeled on the thinking of Peter Lynch. This screen focuses on the P/E/G ratio, which is the price-to-earnings ratio relative to growth, and is a measure of how much the investor is paying for growth. A P/E/G of up to 1.0 is allowed, and Bed Bath & Beyond sports a reading comfortably below that level, at 0.61. Another big plus is the fact that it has zero debt.

A third large-cap to consider is oil giant Chevron (CVX), which is a favorite of my Lynch strategy and has a market cap in excess of $211 billion. Its yield-adjusted P/E/G is a very acceptable 0.71. At the same time, the company has a very low level of debt, with equity coming in at more than 10x debt.

Large-caps have been star performers of late -- and, even if they falter during the coming year, the three stocks I just mentioned look posed to do well. After all, they've passed muster with these guru strategies, which indicates they are financially solid and trading at an attractive price.

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