Investment Strategist Favors Large-Cap Sector

While small-cap stocks show strong valuations, the large-cap stock sector has traded at a discount, making it attractive, according to James Swanson, chief investment strategist with MFS Investment Management.

"Many large-cap companies are growing with a limited amount of leverage. Their ability to grow at this rate shows that they are doing it in a much more organic fashion and are not overextended with debt to finance their growth," Swanson said at a recent MFS year-end investment outlook luncheon.

Large-cap stocks returned on average 11.77 percent annually from 1926 to 2011.

"In the last year or so, large caps have been hurt by a general slowdown in Europe and in emerging markets because they derive a significant portion of their revenue from outside the U.S.," Swanson said. "As Europe and emerging-market countries recover and the U.S. remains in a slow-growth mode, these companies are poised to do well, especially the higher-quality large caps that don't have a significant amount of leverage on their balance sheets."

"Large-cap companies most likely to benefit from a bump in earnings in 2014 are not only the economically sensitive technology and industrial stocks but also consumer durables," said David Edwards, president of the New York-based Heron Financial Group. "Generally, large-cap companies have more stable and reliable earnings and small-cap companies have faster growing earnings."

Source:  Juliette Fairley, Financial Advisor magazine

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D2 Capital Management uses multiple Large Cap strategies as the core element in our investment portfolios.

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