It is true that the stock market has been struggling of late, but parts of it are doing better than others. As I write this, the S&P 500, which is made up of large-cap stocks, is up a shade for the year. The Russell 2000, which is made up of small-caps, is down close to 8%.
Despite the market turmoil, the economy is doing reasonably well. Unemployment is just below 6%, the labor market is gaining 2.5 million new jobs per year, and industries such as autos and housing are firming up. All of this makes me think this is a good time to focus on large-cap stocks.
The larger the company, the more it has in market and economic clout. I want to tell you about three mega-cap companies, which I am defining as having a market cap in excess of $150 billion.
AT&T (T), whose market cap is $176 billion, is a telecommunications company with a very strong market position. In addition, this company is very attractive in the view of my James P. O'Shaughnessy-based strategy. I likes the company's large market cap, positive cash flow per share, large number of outstanding shares, and huge sales ($130 billion). Add in AT&T's hefty 5.43% dividend, and AT&T is a strong investment opportunity.
Super-sized drug maker Novartis (NVS) is also an O'Shaughnessy-strategy favorite due to the size of its sales ($57 billion), number of outstanding shares, positive cash flow, market cap of $230 billion, and dividend yield of 3.20%.
BHP Billiton (BHP) just makes the grade as one of my mega-cap stocks with a $150 billion market cap. BHP is the world's largest publicly-traded mining conglomerate, producing oil, gas, nickel, iron ore, copper, coal, aluminum, silver, and more. Similar to the other two companies just mentioned, this is an O'Shaughnessy strategy favorite, with large sales ($67 billion) and a strong dividend yield (4.12%).
Being huge does not guarantee that a company can counter all economic headwinds, but these three firms are well-placed in their industries and earn high grades from my O'Shaughnessy strategy. If you like the idea of buying into market weakness, consider these three stocks.