The market as tracked by the SPY fell from over 134 to 130 (roughly 3%) in just a few days. The S&P 600 small-cap index fell harder during this same period with a 4.5% loss. When markets are good, small caps (Fama and French) historically have the edge. (If you like small-caps, read the controversial article on China small-caps or 14 Small Value Stocks Ready to Rock the Market.)
When markets turn sour, the big and mega-caps could provide some safer, at least less volatile, long trading ideas.
For this scan we will simply look for stocks with the following:
- More than $10 billion market cap.
- Performance up for the day and the week (during the market drop).
- Current and Forward PE under 20.
- U.S. stocks only.
15 Large Caps Going Up in Down Markets
- AFL – AFLAC Inc.
- CVX – Chevron Corp.
- D – Dominion Resources
- DO – Diamond Offshore Drilling Inc.
- EP – El Paso Corp.
- GLW – Corning Inc.
- HNZ – HJ Hienz
- KO – The Coca-Cola Company
- NLY – Annaly Capital Management, Inc.
- PFG – Principal Financial Group Inc.
- PM – Philip Morris International, Inc.
- RTN – Raytheon Co.
- USB – U.S. Bancorp
- VFC – V.F. Corporation
- WPZ – Williams Partners L.P.
A Quick Look at Financial Ratios (Data by FINIZ)
- PEG ratios have been widely used to determine if a stock is fairly valued when compared to its future growth. While this is less useful in large-value stocks, and also in dividend-paying companies, it is still useful to see which PEG ratios are close to one that may make them worth a second look. CVX, GLW, and AFL all have PEG ratios under 1.
- Stocks with low Price to Sales ratios under 1.2 are PFG, CVX, and RTN. This is another metric popularly used by Ken Fisher.
- Low price to book ratios has been popular among value investors with Fama and French highlighting their upside potential, especially in smaller stocks. Nonetheless, in larger stocks this also relates to high intrinsic value which should create some support for prices. Stocks with price to book ratios under 2 are PFG, NLY, GLW, RTN, and CVX (2.01).
- Stocks with annualized five-year growth rates above 10% are CVX, PFG, and GLW.
- Dividend yields are present on all 15 stocks. Yields below 2% are EP, DO, GLW, and PFG. The highest yield is NLY, which is over 14%. But dilution is underway with NLY, so make sure you know the risks. The remaining stocks have a dividend yield between 2 – 6%.
A Quick Look at Price Action
- Stocks trading within their upwards trending channel? EP, DO, GLW, PFG, and AFL. Note that PFG and AFL are near the bottom of their trading channels, which could give a nice support and pop upwards if the bounces back.
- Stocks that broke above their trading channels in the last few days? VFC, CVX.
- KO has been consolidating since the beginning of 2011 and has been creeping up all month long.
- RTN is just below a $52 support.
- HNZ had a two-month pullback to $47 support and made a wild jump up. It's now toying with new highs.
- PM is making a strong breakaway from its three-month consolidation ending in February.
- D is trading slightly above an old high from last October. I’d like to see the new support tested around $44.50.
- WPZ broke out above its ascending wedge in a continuation pattern.
- NLY is toying with the lowest edge of its upwards channel. It looks pretty weak at this point, but time will tell.
Are you an investor of the big-cap giants? Are there other defensive picks you like if the market turns south? If so, post a comment and let the other readers know about it.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.