In this article, we will take a look at the 14 most profitable large cap stocks to buy. To skip our analysis of the recent trends, and market activity, you can go directly to see the 5 Most Profitable Large Cap Stocks to Buy.
The profitability of companies of all sizes, including large-cap companies, was impacted by the coronavirus pandemic in 2020. Following the onset of the pandemic, the macroeconomic environment has been rife with myriads of problems including geopolitical problems such as the Russia-Ukraine conflict and more recently, the Hamas-Israel conflict in the Middle East.
The S&P 500 Index is a leading indicator for the large-cap U.S. equities and includes 500 leading companies covering nearly 80% of the available market capitalization in the country. The Index is widely used as a proxy for the large cap stocks in the country. During 2019 and 2020, the Index posted negative year-on-year earnings growth rates of 0.1% and 10.3%, respectively. A slowdown in sales growth and increases in costs led to this decline in profitability. After some financial woes and earning misses in the last couple of years, several leading companies shifted their focus towards cost reduction and operational efficiencies to improve their margins and grow their earnings.
Analysts expect the Index to report earnings growth of nearly 0.6% for CY 2023, according to a report by FactSet. On a quarterly basis, earnings growth entered the negative territory in Q1 and Q2 2023 with -1.7% and -4.1% growth, respectively. The third quarter posted positive growth of 4.9% with estimated 2.4% growth in Q4 2023. Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:META) were among the leading contributors to the earnings growth for the Index.
The NASDAQ-100 Index, another index composed of large-cap companies, has outperformed the market so far this year supported by several major technological advancements as well as operational measures undertaken by its components. Recent advancements in generative artificial intelligence are one of the biggest developments in the technology space this year with significant potential to disrupt nearly all aspects of our lives in the upcoming years. GPU-maker NVIDIA Corporation (NASDAQ:NVDA) has been the one of the biggest beneficiaries of this advancement so far, with share price up nearly 236% year-to-date. The Nasdaq-100, as a whole, has gone up nearly 54% year-to-date, compared to nearly 24% for the S&P 500 Index. You can read more about the recent interest rate cuts which have led to the latest rally in the stock markets here.
Our list of 14 most profitable large cap stocks to buy includes some of the most notable names in the stock markets and includes several trillion-dollar companies. These companies have benefited from multiple factors recently, including cost cutting measures, AI revolution, and macroeconomic factors such as slowdown in interest rate increases, among others. The list includes chipmaker NVIDIA Corp (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), among others.
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Methodology
Our list of 14 most profitable large cap stocks to buy includes the top 14 companies in dollar terms of trailing twelve month net profit figures that are currently a good buy option. To identify these companies, we first shortlisted the companies with the highest net profits in the trailing twelve months (TTM). We narrowed our selection and only retained companies that have positive analyst recommendations and average analyst target prices more than their current prices. As a result, one very prominent and otherwise very profitable company didn't make the cut. The stocks have been ranked in an ascending order of their net profit figures. For each stock we have also mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Cincinnati, Ohio-based The Procter & Gamble Company (NYSE:PG) is the world's largest consumer goods company with products across beauty, grooming, health care, fabric & home care, and baby, feminine & family care segments. It is home to iconic brands such as Always, Febreze, Gillette, Head & Shoulders, Oral B, Pantene, Pampers, Tide, and Vicks.
The Procter & Gamble Company (NYSE:PG) declared a quarterly cash dividend of $0.9407 per share in July. The company has been paying dividends for 133 consecutive years since incorporation in 1890, with 67 consecutive years of dividend increases.
On November 13, Jefferies analyst Kaumil Gajrawala initiated coverage of The Procter & Gamble Company (NYSE:PG) with a price target of $177 and a ‘Buy’ rating. The price target represents a potential upside of 21.41% based on the share price on December 19.
As of Q3 2023, 75 of the 910 hedge funds tracked by Insider Monkey held shares of The Procter & Gamble Company (NYSE:PG), worth $5.7 billion. Its largest shareholder was Ken Fisher’s Fisher Asset Management with ownership of 10.0 million shares valued at $1.5 billion.
Philadelphia, Pennsylvania-based Comcast Corporation (NASDAQ:CMCSA) is a global media and technology company. It delivers broadband, mobile, and video products; produces and distributes entertainment, sports, and news; and brings theme parks and attractions to life.
On October 26, Comcast Corporation (NASDAQ:CMCSA) released its financial results for Q3 2023. Its revenue increased by 1% y-o-y to $30.1 billion while it generated a net income of $4.0 billion, compared to a net loss of $4.6 billion. Its normalized EPS of $1.08 exceeded consensus estimates by $0.13.
Following the earnings release, Scotiabank analyst Jeff Fan downgraded Comcast Corporation (NASDAQ:CMCSA) to ‘Sector Perform’ from ‘Sector Outperform’ with a price target $49.
Bentonville, Arkansas-based Walmart Inc. (NYSE:WMT) is a leading global discount retailer operating more than 10,500 stores and numerous eCommerce websites in 19 countries. The company employs nearly 2.1 million personnel worldwide.
On November 16, Walmart Inc. (NYSE:WMT) released its financial results for the Q3 2023. Its total revenue increased by 5% y-o-y to $160.8 billion, while it reported a net income of $453 million. It reported a normalized EPS of $1.53 for the quarter, $0.01 more than the analyst consensus.
Walmart Inc. (NYSE:WMT) repurchased $1.3 billion during the nine month period ended in September. The company still has $18.1 billion authorization remaining of its $20 billion repurchase program approved in November 2022.
As of Q3 2023, 80 of the 910 hedge funds tracked by Insider Monkey held Walmart Inc. (NYSE:WMT) shares valued at a combined total of $6.0 billion. Ken Fisher’s Fisher Asset Management was its largest hedge fund shareholder with ownership of 9.1 million shares valued at $1.5 billion.
Hangzhou, China-based Alibaba Group Holding Limited (NYSE:BABA) is a leading ecommerce company with businesses comprising China commerce, international commerce, local consumer services, logistics services, cloud, digital media and entertainment, innovation initiatives and others.
On March 28, Alibaba Group Holding Limited (NYSE:BABA) announced a new organizational and governance structure for the company under which the company will be divided into six major business groups with independent CEOs and board of directors. Five of the business groups will have the flexibility to seek their own IPOs while the sixth business group, Taobao & Tmall Group, will remain fully owned by the company.
As part of the plans for the new structure, on September 26, Alibaba Group Holding Limited (NYSE:BABA) announced its intention to spin-off and separate listing of Cainiao Smart Logistics Network Limited on the Stock Exchange of Hong Kong (HKEX). The company currently owns 69.54% shares of Cainiao and intends to retain more than 50% of Cainiao shares post-transaction.
On December 20, Alibaba Group Holding Limited (NYSE:BABA) announced its intention to form a new asset management company to focus on managing the operation of the Company’s non-core assets as part of its ongoing efforts to improve return on capital and enhance shareholder value.
NVIDIA Corporation (NASDAQ:NVDA) is a leading technology company focused on the design and manufacturing of accelerated computing hardware and software products. Its core businesses comprise of Gaming, Data Center, Professional Visualization, and Automotive, with Gaming and Data Center making up for more than 80% of its revenues.
Several analysts raised their firm’s respective price targets for NVIDIA Corp (NASDAQ:NVDA) shares following another strong quarterly performance with revenue surpassing consensus estimates by $2.0 billion (11%) in Q3 2023. Among the prominent firms covering the stock, Wells Fargo analyst Aaron Rakers holds the highest price target for the chipmaker at $675 with an ‘Overweight’ rating. The target price represents a potential upside of 35.77% based on the share price on December 19.
Hedge funds are bullish about NVIDIA Corporation (NASDAQ:NVDA) shares as the number of hedge funds that own its shares has increased from 106 in Q1 to 180 in Q3 2023. These hedge funds together held shares worth $29.6 billion according to Insider Monkey data.
Amazon.com, Inc. (NASDAQ:AMZN), is a multinational technology company operating online and physical stores where it sells its own products as well as allows third-party sellers to sell their products to consumers. It manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, and Ring, and develops and produces media content; and provides cloud computing services through Amazon Web Services platform.
Hedge funds really like the shares of Amazon.com, Inc. (NASDAQ:AMZN) as 286 out of the 910 hedge funds tracked by Insider Monkey held its shares with a total value of $38.9 billion, as of Q3 2023. Even though the company generates most of its revenue from ecommerce, the cloud platform of the company, which has been growing at a remarkable pace, is touted to be a potential “gold mine” in the recent future.
In its Polen Global Growth Q3 investor letter, Polen Capital, an investment management firm, made the following comments about Amazon.com, Inc. (NASDAQ:AMZN):
“Amazon continues to showcase its place as one of the most competitively advantaged companies in the world. The company has made significant progress in managing costs and better leveraging existing capacity, driving a strong recovery in its profitability. We think there’s additional room for improvement. AWS growth seems to be stabilizing even while management continues to work with clients to optimize their infrastructure spend. Roughly 90% of global IT spending remains on premise. We believe this will eventually flip, with most IT spending ultimately moving to the cloud over time. We think AWS will be a significant beneficiary of this transition. [. . .] At Amazon’s current price, we believe the company is well positioned to deliver a mid-teens or higher total shareholder return for our clients over the next five plus years without a Herculean effort from the business. It simply needs to continue executing on current businesses and growing into the capacity it built during and immediately after the pandemic.”
Stellantis N.V. (NYSE:STLA) is a leading multinational automaker based in Amsterdam, Netherlands. Its vehicles brands include Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS Automobiles, Fiat, Jeep, Lancia, Maserati, Opel, Peugeot, Ram, Vauxhall, and mobility brands Free2move and Leasys.
On October 26, Stellantis N.V. (NYSE:STLA) announced plans to invest nearly €1.5 billion to acquire approximately 20% of Leapmotor, a Chinese pure-play electric vehicle company. The companies also intend to form a 51/49 joint venture, led by Stellantis N.V. (NYSE:STLA), with exclusive rights for the export and sale, as well as manufacturing, of Leapmotor products outside Greater China.
Stellantis N.V. (NYSE:STLA) repurchased its shares worth €1.2 billion during the nine months ended September 30. In addition, the company also repurchased an additional €934 million worth of shares in November from Dongfeng Motor Group Company Limited.
Like other stocks such as Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA), and Microsoft Corporation (NASDAQ:MSFT), Stellantis N.V. (NYSE:STLA) is among the 14 most profitable large cap stocks to buy.
UnitedHealth Group Inc. (NYSE:UNH) provides health coverage, software, data, and consultancy services. Its health insurance business utilizes technology and data capabilities to help coordinate patient care, improve affordability, analyze cost trends, manage pharmacy benefits, and create a simpler consumer experience.
On October 13, UnitedHealth Group Inc. (NYSE:UNH) released its financial results for the third quarter of 2023. It generated a strong performance during the quarter with total revenue and net income both exceeding Q3 2022 figures by more than 10% at $92.4 billion and $6.0 billion, respectively.
Following the earnings release, RBC Capital raised the firm's price target on UnitedHealth Group Inc. (NYSE:UNH) shares to $596 from $572 and maintained an ‘Outperform’ rating.
As of Q3 2023, 104 of the 910 hedge funds tracked by Insider Monkey owned shares of UnitedHealth Group Inc. (NYSE:UNH), valued at $11.0 billion. Its largest shareholder was GQG Partners with ownership of 3.2 million shares valued at $1.6 billion.
In its Baron Health Care Fund Q3 2023 investor letter, Baron Funds, an investment management company, made the following comments about UnitedHealth Group Inc. (NYSE:UNH):
“UnitedHealth Group Incorporated is a diversified health and well-being company with $200 billion in revenue that operates across four segments, United Healthcare, Optum Health, OptumInsight, and OptumRX, serving 134 million individuals in all 50 states and more than 125 countries. [. . .] We remain positive on this market-leading managed care company with revenue twice that of its closest competitor. The company continues to gain Medicare Advantage share given attractive and stable benefits and could achieve greater profitability as medical management is deployed across newer, higher acuity lives. We believe UnitedHealth has a broad number of levers at its command and can sustainably deliver 13% to 16% annual longterm earnings growth.”
San Ramon, California-based Chevron Corporation (NYSE:CVX) is one of the world’s leading integrated energy companies. It produces crude oil and natural gas, and manufactures transportation fuels, lubricants, petrochemicals, and additives.
On December 14, UBS analyst Josh Silverstein lowered the price target for Chevron Corporation (NYSE:CVX) shares to $185 from $194 and maintained a ‘Buy’ rating for its shares.
As of Q3 2023, 72 hedge funds tracked by Insider Monkey owned Chevron Corporation (NYSE:CVX) shares valued at $21.5 billion. Warren Buffett’s Berkshire Hathaway was its largest hedge fund shareholder with ownership of 110.2 million shares valued at $18.6 billion.
In its “Ariel Focus Fund” Q3 2023 investor letter, Ariel Investments, an investment management company, made the following comments about Chevron Corporation (NYSE:CVX):
“We view the company [Chevron] as competitively advantaged with a strong balance sheet, sustainable growth pathway and an effective management team. Going forward CVX expects improved cost efficiencies and production growth via its differentiated position in the Permian Basin and recent acquisition of Noble Energy. Additionally, management believes a combination of its new higher-margin projects along with operational improvements will drive a double-digit return of capital employed by 2027. Although oil and gas prices, which lay outside of the company’s control, ultimately dictate Chevron’s earnings and cashflow profile, the organization is laser focused on capital discipline. It is this lack of predictability, and potential fear of a global recession which presented us with an opportunity to initiate a position in this high barrier to entry producer at reasonable prices.”
