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Investing in large-cap stocks is a safe bet, particularly in times of economic uncertainties and rigid credit circumstances. Many investors consider large-cap stocks as an essential part of their portfolio, given the stability, steady dividends and the security they offer.
For investors who are looking for high returns, large-cap stocks are the preferred investment options. Large-cap stocks also come with lower risk as compared to small-cap and mid-cap stocks, making them even more attractive.
Technology Sector Outperforms
Technology has been one of the most profitable sectors for investors on a year-to-date basis. The technology sector continues to outshine Dow Jones Industrial Average and S&P 500.
The Technology Select Sector SPDR has recorded a growth of approximately 30% on a year-to-date basis. In contrast, Dow Jones Industrial Average and S&P 500 went up around 11% and 18%, respectively, during the same period. The sector is benefiting from rising demand for cutting-edge technologies such as cloud computing, Big Data, artificial intelligence (AI), wearables, AR/VR headsets, drones, self-driving cars and Internet of Things (IoT).
Also, the increase of 5G platform and technology appears as the next best growth driver for these companies.
Reasons to Invest in Large-Cap Stocks
Here are three persuasive reasons why investors should put their money in large-cap stocks:
Stability in Large-Cap Companies: The large size of the company helps them to sustain in the competitive market. Compared to small-cap companies, large-cap company stocks are a safer investment option.
Large-Cap Stocks are a Safer Bet in Recession Times: During a decline in the business cycle, investors tend to migrate to large-cap companies. This implies that these companies are expected to survive economic slowdown without shutting down their business entirely.
Dividend-Paying Stocks: Large-cap stocks have a strong dividend growth history and fall into mature companiesâ category, which are less prone to significant changes in the market, and thus act as a fence against economic or political ambiguity. At the same time, these stocks offer downside security with their steady rise in pay-outs.
Relation between Large-Cap Stocks and Blue-Chip Stocks
Most of the large-cap companies are also blue-chip stocks. The term âBlue Chipâ refers to companies that have their market capitalisation in billions and have a history of generating steady earnings. The blue-chip companies have an option to pay a dividend to their shareholders regularly and enhance shareholders value. Moreover, a blue-chip stock helps the company reduce its business risk and helps in diversification.
Our Choices
Considering the factors mentioned above, we have zeroed in on 3 Large-Cap Technology Stocks which have potential in the near-term:
Xero Limited (ASX: XRO)
Xero offers an online business platform to small and medium businesses. The company integrates with more than 400 add-on applications letting customers modify Xero to their demands. The company has a total subscriber base of more than 1.8 million worldwide.
Recently, Xero reported its half-year FY 2020 results (period ended 30 September 2019):
The company reported operating revenue of NZ$338.7 million, up 32% year over year. Total subscribers increased 30% year over year. For half-year 2020, the annualised monthly recurring revenue (AMRR) reached NZ$764.1 million, an increase of 30% year over year. Free cash flow came in at NZ$4.8 million, as compared to a negative free cash flow of NZ$9.8 million reported in the prior year. Net profit after tax came in at NZ$1.3 million. Excluding impairments, EBITDA stood at NZ$65.9 million during the period.
Stock Performance
Xero Limited has a market cap of $11.49 billion with ~141.47 million outstanding shares. Further, shares of the company went up 33.60% and 93.64% on six months and on a year to date basis, respectively. The companyâs stock was trading at $80.430 on 20 December 2019 (03:21 PM AEDT), down 0.985% relative to the previous close.
WiseTech Global Limited (ASX: WTC)
WiseTech Global Limited is a provider of cloud software solutions to the logistics industry, both overseas and domestically. The companyâs leading product offers end-to-end logistics solution and forms an essential part of the supply chain worldwide.
Digging into the financial results for the fiscal year 2019 (period ended 30 June 2019)
The company delivered revenues of $348.3 million, up 57% year on year while NPAT grew 32.65% to reach $54.1 million during the period. The increase was due to strong business growth worldwide coupled with the development of CargoWise One product platform. EBITDA increased 39% year over year and stood at $108.1 million. The company also paid a fully franked final dividend in FY19 of 1.95 cps.
Stock Performance
WiseTech Global Limited has a market cap of $7.88 billion, with ~318.19 million outstanding shares. Further, shares of the company were down 45.33% and 39.44% on a year to date-basis and one-year basis, respectively. WTC stock was trading at $24.730 on 20 December 2019 (03:22 PM AEDT), down by 0.081% (at AEDT 3:23 PM).
Afterpay Touch Group Limited (ASX: APT)
Afterpay Touch Group is a technology-driven payments company with a presence Australia, New Zealand, United States, and the United Kingdom. The company provides its services to organisations in the healthcare, telecommunications, and retail sectors in Australia and abroad.
FY19 Highlights for the Period Ended on 30 June 2019
The company has recently provided the financial results for the fiscal year 2019. The key highlights are mentioned as follows:
The companyâs underlying revenues soared 140% to reach $5.2 billion, bolstered by 99% increase sales in Australia and New Zealand. Active merchants went up 101% year over year to reach 32,300 during the period. EBITDA (excluding significant items) stood at $35.5 million in FY19. The company reported adjusted operating cash flow of $71.4 as compared to $42.5 million in FY2018. Free cash flow during the period stood at $33.3 million as compared to 22.9 million reported in FY2018. Net cash at the end of the year came in at $183.3 million.
Stock Performance
Afterpay Touch Group has a market cap of $7.5 billion, with ~260.52 million outstanding shares. Further, shares of the company went up 139.83% and 140.23% on a year to date-basis and on a one-year basis, respectively. APT stock was trading at $29.280 on 20 December 2019 (03:24 PM AEDT), up by 1.737%.
Disclaimer
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
