7 Large Cap Stocks to Buy for Long-Term Stability

  • These large cap stocks are a great complement to growth stocks, but they're more stable
  • Pfizer (PFE): Trading at attractive valuations with a deep pipeline of drug candidates ensuring long-term growth visibility.
  • Lockheed (LMT): Geo-political tension escalation is a tailwind for growth.
  • Walmart (WMT): Retail spending remains the backbone of growth for the U.S. economy.
  • Chevron (CVX): The best oil and gas stock from a balance sheet, cash flow and asset perspective.
  • Altria (MO): Business transformation to oral tobacco products yielding positive results.
  • Apple (AAPL): Earnings growth likely to sustain with diversified revenue sources.
  • Amazon (AMZN): Correction provides an attractive entry opportunity.
large cap stocks - 7 Large Cap Stocks to Buy for Long-Term Stability

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Large-cap stocks are dividend aristocrats with steady returns and low beta. Growth stocks are the portfolio upside catalysts and can deliver multi-fold returns. It, therefore, makes sense to have a portfolio that’s a blend of growth and large-cap stocks.

In the last 10-years, the Vanguard Large Cap ETF (NYSERCA:VV) has delivered annualized returns of 14.22%. During the same period, the Vanguard Growth ETF (NYSEARCA:VUG) has given annualized returns of 15.23%.

Besides providing stability to the portfolio, large-cap stocks have also matched returns of growth stocks in this period. Even if the same is not replicated in the next 10-years, it still makes sense to hold quality large cap stocks.

In the recent market correction, dozens of high-flying growth stocks have plunged by more than 50%. This underscores the importance of having a balanced portfolio.

PFE Pfizer $51.78
LMT Lockheed Martin $432.72
WMT Walmart $121.02
CVX Chevron $177.52
MO Altria $48.66
AAPL Apple $142.64
AMZN Amazon $116.15

Pfizer (PFE)

blue Pfizer (PFE) logo on the windows of a corporate building
Source: photobyphm / Shutterstock.com

With the stock trading at a forward price-to-earnings-ratio of 7.8 and offering a dividend yield of 3.0% Pfizer (NYSE:PFE) is among my favorite large-cap stocks.

PFE stock has trended higher by 36% in the last 12-months on the boost from earnings and cash flow from the covid-19 vaccine, but the vaccine isn’t critical to Pfizer’s future.

Pfizer has a deep pipeline of drug candidates for the next few years. This will ensure steady organic growth. Additionally, Pfizer has been on an acquisition spree in the last few quarters.

It’s worth noting that for 2022, the company expects research and development expenses in the range of $11 to $12 billion. With strong cash flows, meaningful investments in R&D will sustain.

Overall, PFE stock is positioned to deliver steady returns in the coming years through dividend and stock upside. The low-beta stock is worth holding in the portfolio.

Lockheed Martin (LMT)

A Lockheed Martin (LMT) Space Systems sign in Sunnyvale, California.
Source: Ken Wolter / Shutterstock.com

With the escalation in tensions between Russia and Ukraine, Lockheed Martin (NYSE:LMT) stock has trended higher by 22% for year-to-date 2022.

However, this might just be the beginning of the long-term rally for the stock.

Prior to the recent escalation in tensions, most of the NATO members have been behind their defense spending targets. It’s likely that aggressive spending by NATO allies will benefit Lockheed in the coming years.

It’s worth noting that Lockheed reported an order backlog of $134 billion as of March 2022. This provides clear cash flow visibility. The company has already guided for free cash flow of $6.0 billion for 2022.

Strong cash flows will ensure that the current dividend of $11.2 per share sustains. If growth accelerates backed by higher defense spending, dividends can possibly increase.

Walmart (WMT)

Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
Source: Jonathan Weiss / Shutterstock.com

With inflationary pressure and fears of recession, retail stocks have taken a beating. Walmart (NYSE:WMT) is no exception. However, I believe that the stock is trading at attractive levels for long-term exposure.

The U.S. economy is largely consumption-based and retail spending is a key component of consumption expenditure. Policies will therefore shift to expansionary if there is a recession. There is unlikely to be a significant impact on the company’s sales.

Walmart has been building strong omnichannel sales capabilities. This will ensure that growth sustains in the long term. Additionally, the company has a presence in attractive international markets. Over the next few years, international sales can be a key growth driver.

Of course, inflation is likely to affect the company’s bottom line through 2022. This factor seems discounted in the stock. Once inflation eases, cash flows will be robust. I would consider WMT stock for a dividend yield of 1.8% and a low beta.

Chevron Corporation (CVX)

chevron stock
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With Brent oil trading well above $100 per barrel, Chevron (NYSE:CVX) stock has been on a sustained upside.

In the last six months, the stock has returned 50%. I believe that small corrections offer opportunities to gain exposure to CVX stock.

A big reason to be bullish on Chevron is fundamentals. As of Q1 2022, the company reported a net-debt ratio of 10.8%. Further, for the quarter, the company’s operating cash flow was $8.1 billion.

Given the strong fundamentals, Chevron plans to invest $15 to $17 billion annually through 2026. This is likely to ensure steady growth. At the same time, Chevron is investing in renewable assets.

It’s also worth noting that the company has low break-even assets. Even if oil corrects from current levels, cash flows will remain robust.

The dividend yield is therefore likely to remain attractive and share repurchase will create incremental value. Currently, the company has an annual buyback guidance in the range of $5 to $10 billion.

Altria (MO)

a sign with the Altria (MO) logo
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Another large-cap stock that trades at an attractive valuation and has a robust dividend yield is Altria (NYSE:MO). Even if MO stock remains sideways, a dividend yield of 6.7% is a big reason to buy.

It’s worth noting that Altria is in a business transformation phase. It’s unlikely that top-line growth will be robust in the next few years. However, cash flows are likely to remain stable.

The company’s smokable product segment is a cash machine that serves two functions.

First, it allows the company to invest in the non-smokable product category, which has shown encouraging results. In the non-smokable products segment, the company’s oral tobacco market share has been increasing.

Further, dividends and share repurchase will sustain with cash flows from iconic brands like Marlboro.

Altria also has investments in the cannabis sector through sake in Cronos (NASDAQ:CRON). Depending on the regulatory tailwinds, the stake can create value in the next five years.

Apple

Apple (AAPL) stock information in a magnifying glass.
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Apple’s (NASDAQ:AAPL) earnings growth has remained robust and AAPL stock is likely to deliver value on a sustained basis.

It’s also a quality dividend growth stock for the portfolio.

For Q2 2022, Apple reported revenue and EPS growth of 9% and 8.5% respectively. The iPhone segment remains the cash cow for the company. With 5G phones, growth is likely to sustain in this segment.

At the same time, Apple continues to report strong numbers from the wearable and services segment. Apple also has the financial flexibility to diversify. Speculations continue on the company’s electric car. Overall, the innovation factor makes AAPL stock worth holding in the long term.

Apple has also been creating value through aggressive share repurchase and dividends. Just for Q2 2022, the company returned $27 billion to shareholders.

In the last 12-months, AAPL stock has trended higher by 13%. The stock still trades at an attractive forward P/E of 23.8 and seems poised for further upside.

Amazon (AMZN)

Amazon (AMZN) building at night time with logo light up on building
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Amazon (NASDAQ:AMZN) stock has been trending lower with a correction of nearly 33% over the last six months. This seems like a good accumulation opportunity from a long-term perspective.

For Q1 2022, Amazon reported 7% revenue growth to $116.4 billion. The company’s operating and free cash flow have also been subdued on a relative basis.

However, growth for AWS has remained robust. In the last two years, AWS has witnessed an annual growth rate of 34%. The cloud business will continue to boost overall growth.

At the same time, e-commerce adoption remains in an uptrend on a global basis. With a presence in key emerging markets, Amazon is positioned to benefit.

It’s also worth noting that Amazon has been investing in emerging businesses. This includes virtual health care and broadband services. Considering the financial flexibility, investment in new businesses will help Amazon diversify and sustain growth.

Overall, AMZN stock is attractive among large-cap stocks after some correction. The company will continue to create value for shareholders in the coming years.

On the date of publication, Faisal Humayun did not hold (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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.


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