Rules of the Game: Large-Cap Growth Beyond Cupertino

 | Dec 28, 2012 | 2:00 PM EST
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In my last story, I focused on some relatively recent IPOs that could add alpha to a portfolio that otherwise consisted of more mature, stable large caps and not-so-exotic ETFs.

When evaluating your strategic or tactical allocation shifts for 2013, another component to consider is large-cap growth. For the past few years, that has tended to mean wedging in some Apple (AAPL) shares. I am by no means writing off the stock, and we continue to hold it in some client portfolios. But the road to large-cap growth does not begin or end in Cupertino.

In fact, it's not even limited to just the tech sector. Recently, I wrote about one of the best large-cap growth performers, Regeneron Pharmaceuticals (REGN), which has advanced 196% year-to-date, and was trading at around $170 on Thursday. The stock retreated along with the broader market this week, but was holding above its 50-day moving average.

That's still a good example of a large growth name that holds plenty of potential, especially now that it is taking a breather below its Nov. 29 high of $188.95.

But I wanted to highlight some other names that are on my radar. One erstwhile growth leader that's showing new signs of life is Cognizant Technology Solutions (CTSH). The tech-services provider has struggled this year, as investors and traders fretted about growth in a sluggish global economy. In fact, revenue grew at rates of 18% or higher in each of the past eight quarters, and earnings grew at a pace of 21% or higher.

Analysts see the company wrapping up this year with earnings of $3.43 per share, a gain of 21%. In 2013, that's expected to grow 17%, to $4 per share.

The chart has not exactly been a picture of strength, going back as far as May 2011. Cognizant is up 7.5% this month, and was trading at around $72 late in Thursday's session. It's trading at its best levels since May.

One of the metrics I track, free cash flow per share, has been essentially stagnant. That's a bit of a black mark, but I continue to like the earnings potential on this stock. Sure, the global economy remains a challenge, but the company has weathered the storm fairly well thus far, despite analysts' handwringing.

Another large-cap that's been on and off my radar for several years is Valeant Pharmaceutical (VRX). December has been a good month for the stock, sending it 7.6% higher to $59.48.

The stock has been hitting resistance just above $61. Valeant could be considered in a technical buy zone at the moment, perched between its prior high and its 50-day average.

Fundamentally, the maker of treatments for nervous-system disorders has been a solid performer. Revenue grew at rates of 34% or higher in every quarter of the past two years. Earnings rose 22% or more during the past six quarters.

The growth estimates here are also promising. For 2012, the company is expected to report income of $4.53 per share, up 55%. In 2013, that's seen growing 24%, to $5.63 per share.

Earlier this month, Valeant completed its $2.6 billion acquisition of Medicis Pharmaceutical, maker of Restalyne and other dermatological products.

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