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Stock Strategist

Large-Cap Stocks to Watch

These big-name winners are selling at a discount.

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Large-cap stocks--which Morningstar defines as stocks with market capitalizations of about $8.5 billion and above--have been sorely out of favor in recent years. While small-cap stocks have surged ahead, large caps--particularly big growth stocks--haven't kept pace. After reaching dizzying valuations in the late 1990s, large stocks were crushed in the bear market, and many haven't kept pace with smaller-cap issues as the has market recovered. As a result, the Morningstar Large-Cap Index has posted annualized losses of more than 3% per year over the trailing five-year period.

But it would be a mistake to write off this segment of the market. Indeed, while market valuations are relatively steep across the board, valuations on the market's biggest names aren't quite as nosebleed-inducing as those on small-cap issues. There's also something to be said for owning large companies that have consistently generated top- and bottom-line growth in a variety of market climates.

John Novak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.