7 High-Quality Large Cap Stocks to Buy at a Discount
These large-cap stocks offer tremendous upside potential and trade at a hefty discount
5h ago · By Muslim Farooque
Large cap stocks are great long-term investments and can be picked up cheap now.
Pfizer (PFE): M&A plus an impressive pipeline makes this stock worth another look.
Mastercard (MA): Recent results show a healthy expansion in cross-border and other segment sales.
Equinor (EQNR): Renewables portfolio lays the foundation for a massive growth runway ahead.
Meta Platforms (FB): Innovation continues to be the key to growth here.
Alibaba (BABA): Consumer services, cloud, and other non-core businesses point to a bright future ahead.
Cleveland Cliffs (CLF): Will benefit from having built an inflation-resistant business
Micron Technology (MU): Semi-conductor giant that continues to grow its addressable market
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Large cap stocks can provide some stability in a rocky market, and equity markets worldwide have taken a massive beating amidst multiple macro-economic headwinds.
Investors are rotating out of the more risky investments into safer bets. However, as investing legend, Warren Buffet put it, “the best chance to deploy capital is when things are going down”.
Today’s stock market’s position perfectly encapsulates his observations, and in following his advice, it would be prudent to invest in large-cap stocks at beaten-down valuations.
Large-cap stocks are some of the most established companies globally, with a history of outperformance. These companies have had an incredible track record of growing revenues, earnings, and cash flows at an astonishing pace.
Moreover, these companies have a penchant for consistently rewarding their shareholders over time. During the current bear run, several large cap stocks are trading cheaply and offer investors an attractive entry point to open up a position.
PFEPfizer$47.91MAMastercard$319.74EQNREquinor$34.02FBMeta Platforms$164.26BABAAlibaba$98.52CLFCleveland Cliffs$18.14MUMicron Technology$58.84
Pfizer (PFE)
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Pharma giant Pfizer (NYSE:PFE) made a truckload of money from its coronavirus vaccine, which helped post record operating results and landed it on this list of large cap stocks to buy.
Covid 19 will account for 32% of its revenues this year, a significant dip from the pandemic years.
Nevertheless, the healthcare giant has depth in its product pipeline and the financial flexibility to accelerate its merger and acquisitions (M&A) activity. It recently acquired biopharma play BioHaven and its famous migraine drug called Nurtec. With Pfizer’s lean balance sheet, I expect similar announcements in the coming months.
It recently posted its first-quarter results where revenues stood at $25.7 billion, and the enterprise could potentially surpass $100 billion in sales by 2022. Therefore, investors seem to be fretting a bit too much. Consequently, PFE stock trades at under three times forward sales, considerably lower than its five-average.
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Mastercard (MA)
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Payments processing giant Mastercard (NYSE: MA) has been one of the most resilient companies over the past several years, with an impeccable record of top and bottom-line expansion.
Its shareholders have enjoyed 11 years of dividend growth, with a five-year growth rate of over 17%. Large cap stocks like this are always worth consideration.
During the first quarter, company revenues were up 24% on a year-over-year basis to $5.2 billion, while operating income increased by 34% from the prior-year period. As a result, its adjusted net income soared 55% to $2.7 billion.
The healthy boost in results came from cross-border transactions, which shot up 53%. Moreover, the payments giant also delivered solid gains from its intelligence, cyber security, and related divisions.
With the recent positive developments, analyst consensus estimates point to a 21% bump in its price target.
Equinor (EQNR)
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Equinor (NYSE:EQNR) is an oil and gas giant based in Norway, with one of the most diversified energy portfolios in the sector.
More than 65% of the company’s production comes from the Norwegian continental shelf, giving it a unique edge over its peers. Europe is desperately looking for energy security, and after declaring natural gas as “green energy,” large cap stocks like Equinor will benefit tremendously from these tailwinds.
More importantly, Equinor is investing heavily in its renewable portfolio to offset the risks associated with oil and gas prices. It generated 511GWh of energy from renewables during the first quarter, a 13% bump from last year’s first quarter.
Looking ahead, the firm expects a $1 trillion opportunity in the segment by 2040; however, the market continues to value it conservatively, ignoring the long-term prospects. EQNR trades at under one time forward sales, whereas its five-year average is close to seven times forward sales.
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Meta Platforms (FB)
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Meta Platforms (NASDAQ:FB) is a social media juggernaut with some of the most powerful brands, including Facebook and Instagram, in its arsenal.
Despite its colossal scale, it has done amazingly well to innovate and adapt to the latest trends. Perhaps the biggest buzzword in the tech industry is the metaverse, which is a focal point in Meta’s future growth strategy.
However, its investors are skeptical of the push towards achieving metaverse supremacy, so FB stock trades at multi-year lows.
The social media giant’s Reality Labs segment is building the metaverse but has consistently burned a boatload of money. Last year alone, it spent $10 billion and another $2.9 billion in segment-wise loss during the first quarter of 2022.
Nevertheless, a bet on the metaverse is a bet on Meta’s ability to consistently prove the naysayers wrong. The sector’s potential is massive, with market estimates ranging from $800 billion to a whopping $30 trillion by the conclusion of the current decade.
Therefore, FB remains a fascinating long-term play among the large cap stocks to buy based the monstrous potential of the metaverse.
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Alibaba (BABA)
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The market has crushed shares of online retail giant Alibaba (NYSE:BABA) amidst a myriad of challenges. As a result, BABA stock now trades roughly 60% lower than its 52-week high price of $230.89. Its fundamentals remain impressive, and new growth opportunities strengthen its long-term bull case.
It recently released its fourth-quarter results, where its revenues and earnings comfortably beat analyst expectations. Alibaba has 1.3 billion annual active customers across the globe and has made over $15 billion in free cash flows for the year.
It didn’t provide any forward guidance due to the current market uncertainties. However, its management expects a focus on generating robust and high-quality revenue growth with an optimized cost structure.
A glowing aspect of Alibaba’s reports was its local consumer services sector, including its last-mile delivery businesses, including Ele.me, Taoxianda, and Fliggy.
The segment grew 29% on a year-over-year basis during the fourth quarter, compared to 9% from the same period last year. Combine that with the strength of its Cloud and potentially lucrative subscription business, and things are looking up for BABA.
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Cleveland Cliffs (CLF)
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Cleveland Cliffs (NYSE:CLF) has undergone a massive transformation over the past few years.
It has gone from being a supplier to the steel industry to one of the largest integrated steel mills in the North American region. It acquired one of the top customers at the time in AK Steel in 2019 and bought production assets of a leading US steel giant ArcelorMittal in 2020.
The new-look CLF didn’t stop there. Last year, it bought a leading scrap metal business, which gives it greater control over input costs.
The business transformation effectively shields it against inflationary effects on steel prices. The company is coming off its best year yet, with revenues and EBITDA growing over 147% and 739.40% on a year-over-year basis. CLF stock trades at just 0.5 times forward sales despite the stellar performance.
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Micron Technology (MU)
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Semiconductor giant Micron Technology (NASDAQ:MU) has been one of the most profitable companies in its niche over the past several years.
Revenue and EBITDA growth has averaged 21% and 56% over the past five years. Moreover, it is exposed to multiple tailwinds in the sector, including autonomous driving, AR/VR, and other technologies.
Micron is a leader in providing memory chips used for computing and storage in a wide variety of applications, including data centers, PCs, and gaming consoles, among others.
It made $15.5 billion in sales during the first six months of fiscal 2022, a remarkable 29% improvement from the same period last year. Analysts feel the company to end the year generating over $30 billion in sales, representing over a 300% increase from its revenues in 2012.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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