Large Cap Alternatives
Based on the quantitative rankings that we recently updated for our model portfolio strategy, there are several large cap stocks on U.S. exchanges that look particularly attractive.
In theory, the share prices of companies with large market capitalization and that pay a dividend yield tend to be less volatile relative to peers in the same industry without these characteristics.
- McDonald’s Corp. (MCD) with a 2.19% dividend yield.
- Costco Wholesale Corp (COST) @ 1.03%.
- Wal-Mart Stores, Inc. (WMT) @ 2.08%.
- Bristol-Myers Squibb Company (BMY) @ 2.48% yield.
- 3M Company (MMM) @ 1.93%.
- Northrop Grumman Corporation (NOC) @1.24%.
- Illinois Tool Works Inc. (ITW) @ 1.63%.
- Rio Tinto plc (RIO) @4.84%.
- BHP Billiton Limited (BHP) @4.01%.
- Texas Instruments Incorporated (TXN) @ 2.04%.
- NVIDIA Corporation (NVDA) @ 0.28%
NVDA is our favorite stock idea for December 2017. It is not often that a growth stock with outstanding future prospects like NVDA declines to a price that is considered “growth at a reasonable price.”
ITW was our favorite stock idea in our theoretical model portfolio last month, and continues to have strong potential.
Stock Selection Criteria
Our criteria for selecting stocks in these model portfolio strategies, which heavily weight proxies for cash flow growth and ROIC, include the following:
- Relative Value
- Operating Momentum
- Consensus Estimate Revision Momentum
- Fundamental Quality
We rebalance our model portfolios every month and have been tracking long-only and long/short theoretical daily returns since March 31, 2009 (up +503.7% and 407.4% through November 30, 2017, respectively).
These models also tend to generate some solid ideas for 12-month holding periods (up an average +25.88% versus an average of +16.24% for the S&P 500 Index since December 31, 2015, and up an average of +13.11% versus an average of +9.06% for the S&P 500 since December 31, 2014).
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: As a simple quantitative model based on fundamental rankings, the portfolio models do not take into account rumors or pending M&A transactions. Theoretical return data reflect simple cumulative returns (not compound returns) and do not assume the impact of costs such as execution fees, margin fees, slippage, the availability of stocks for short selling, or any other kind of cost. There are limitations inherent in our theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. We do our best to provide accurate information in this report, but do not guarantee its accuracy.