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Best Large-Cap Stocks To Buy Now

As we push deeper into December, small-cap stocks and mid-cap stocks could begin marching higher in line with the January effect, a period during which large cap typically lags as institutional investors use the year's fresh slate to restructure portfolios for greater returns. Although the Russell 2000 ETF (IWM) and S&P 400 (MDY) have outpaced the S&P 500 (SPY) in the first quarter over the past 10 years by an average 0.58% and 1.72%, respectively, there are plenty of large-cap stocks you can consider owning too. Read on to discover the best sectors, industries, and stocks to buy now.

The Top Sectors To Buy

Every week, we crunch data on over 1,600 stocks in order to spot sector leadership by market cap.  Scores are based on forward earnings growth, historical trends in reporting earnings that beat Wall Street estimates, insider buying, short term and long-term institutional money flow, forward valuation relative to historical valuation, contra-trend short interest analysis, and quarterly seasonality over the past decade.

This week, the analysis indicates the best large-cap sectors are industrial goods (Weyerhaeuser Company (WY), Illinois Tool Works (ITW), Eaton Corp. (ETN)), financials (T. Rowe Price (TROW), Lazard Ltd (LAZ), State Street Corp. (STT), MarketAxess (MKTX), JPMorgan (JPM), consumer goods (Polaris Inc. (PII), McCormick & Co. (MKC), Kellogg Co. (K)), and services (Trinity Industries (TRN), Old Dominion Freight (ODFL), FleetCor Tech (FLT), Domino's Pizza (DPZ)). Focusing on those sectors should provide you with the greatest shot at "fishing in the right pond" when it comes to stock selection.

Meanwhile, you should be industry- and stock-specific in healthcare, which ranks neutral, and technology, utilities, REITs, and basic materials, which rank below average. Our individual stock and industry rankings further below can help you spot profit-friendly ideas in those baskets.


Are We At A Market Inflection Point?

The following chart provides insight into market inflection points, highlighting extremes in optimism or pessimism using the percentage of stocks in our research universe trading equal to or greater than 5% above or below their 200-day moving average.

This signal has been a very good proxy for actionable buy and sell signals. For example, extreme readings helped you lock in profits in early 2018 and buy risk into the end of 2018. Although readings can remain at extremes for weeks (and sometimes, longer), it makes sense to be cautious (no margin, focus on best names, sell laggards or broken thesis stocks) when the percentage of stocks 5% or higher above their 200 dma reaches 40% or higher.

Currently, 39.8% of our universe is trading 5% or more above their 200 dma, down from 42.8% last week when we suggested to members the possibility of a 3% to 5% pullback. At the low earlier this week, we were down about 2.5% from the S&P 500 high (as of this writing). We'll continue watching this measure closely in the coming weeks for additional, actionable insight.


The Best And Worst Scoring Large-cap Stocks

The next table shows the highest and lowest scoring large-cap stocks in our universe based on our methodology. Because stocks historically follow earnings over time, insiders only buy for one reason; money flow reflects institutional optimism or pessimism, and seasonal patterns often rhyme, these individual stocks have characteristics that are likely to be rewarded or punished from here. Stocks making the biggest jump in score this week to join our best list include Hormel Foods (HRL), McCormick & Co., Accenture (ACN), and Genuine Parts (GPC).

LG CAP4 Week MA
Company NameSymbolINDUSTRYSCORESCORE
BEST
Centene Corp.(CNC)HEALTH CARE PLANS11097.5
AbbVie Inc.(ABBV)DRUG MANUFACTURERS105105
Biogen(BIIB)BIOTECHNOLOGY10595
Domino's Pizza Inc(DPZ)FOOD WHOLESALE10595
FleetCor Tech(FLT)BUSINESS SERVICES10583.75
Hormel Foods(HRL)MEAT PRODUCTS10587.5
Int'l Flavors(IFF)SPECIALTY CHEMICALS10586.25
Kellogg Company(K)PROCESSED & PACKAGED GOODS105100
Lazard LTD(LAZ)ASSET MANAGEMENT10593.75
McCormick & Co.(MKC)PROCESSED & PACKAGED GOODS10578.75
Old Dominion Freight Line Inc.(ODFL)TRUCKING10597.5
Polaris Industries Partners(PII)RECREATIONAL VEHICLES10596.25
Trinity Industries Inc.(TRN)RAILROADS10597.5
T. Rowe Price Group(TROW)ASSET MANAGEMENT105103.75
Weyerhaeuser Co.(WY)LUMBER, WOOD PRODUCTION10592.5
Agilent Tech(A)SCIENTIFIC & TECHNICAL INSTRUMENTS10092.5
Accenture Ltd Bermuda(ACN)MANAGEMENT SERVICES10080
AutoDesk Inc(ADSK)TECHNICAL & SYSTEM SOFTWARE10083.75
Alaska Air Group(ALK)REGIONAL AIRLINES10095
Allstate(ALL)PROPERTY & CASUALTY INSURANCE10092.5
Ameriprise Finl Inc(AMP)ASSET MANAGEMENT10097.5
Amphenol Corp(APH)DIVERSIFIED ELECTRONICS10096.25
Alexandria R E Equities(ARE)REITS10091.25
Avery Dennison(AVY)PAPER & PAPER PRODUCTS10091.25
Autozone(AZO)AUTO PARTS STORES10097.5
Bank of America(BAC)MONEY CENTER BANKS10092.5
Booz Allen(BAH)MANAGEMENT SERVICES10085
Bristol-Myers Squibb(BMY)DRUG MANUFACTURERS10088.75
Capital One Fin'l(COF)CREDIT SERVICES10092.5
Campbell Soup(CPB)PROCESSED & PACKAGED GOODS10097.5
Carlisle Co's(CSL)RUBBER & PLASTICS100100
Dominion Resources(D)ELECTRIC UTILITIES10086.25
Eastman Chemical Co(EMN)CHEMICALS- MAJOR DIVERSIFIED10086.25
Eaton Corp(ETN)INDUSTRIAL ELECTRICAL EQUIPMENT10098.75
Gentix Corp(GNTX)AUTO PARTS10091.25
Genuine Parts(GPC)AUTO PARTS WHOLESALE10088.75
Hologic Inc(HOLX)MEDICAL APPLIANCES & EQUIPMENT10082.5
International Paper(IP)PAPER & PAPER PRODUCTS10092.5
Illinois Tool Works(ITW)DIVERSIFIED MACHINERY100100
Hunt J B(JBHT)TRUCKING100100
JPMorgan(JPM)MONEY CENTER BANKS10097.5
Kroger(KR)GROCERY STORES10092.5
Magna Int'l Inc.(MGA)AUTO PARTS10092.5
Marketaxess Hldgs Inc(MKTX)INVESTMENT BROKERAGE10087.5
Nike(NKE)TEXTILES10090
PPG Industries(PPG)CONGLOMERATES10092.5
Ross Stores(ROST)APPAREL STORES10093.75
State Street Research(STT)REGIONAL BANKS10093.75
Sysco Corp.(SYY)FOOD WHOLESALE10092.5
Thermo Electron Corp.(TMO)CONGLOMERATES10086.25
Valero Energy Corp.(VLO)OIL & GAS REFINING & MARKETING10091.25
WORST
China Unicom(CHU)WIRELESS COMMUNICATIONS1513.75
GrubHub(GRUB)INTERNET INFORMATION PROVIDER1516.25
Transocean Offshore(RIG)OIL & GAS DRILLING & EXPLORATION1517.5

The Top Large-Cap Industries To Buy

The best large-cap industries this week are trucking (ODFL) (JBHT) (KNX), management services (BAH) (ACN), healthcare plans (CNC) (WCG) (UNH) (CI) (ANTM), major chemicals (EMN) (FMC), and auto parts stores (AZO) (ORLY).


Taking this analysis further, we can determine the best and worst industries for investment ideas by sector.

  • The best basket in basics is major chemicals.
  • Concentrate on auto parts (Magna Int'l, Gentex Corp., BorgWarner (BWA)), processed & packaged goods (McCormick & Co., Kellogg Co., Campbell Soup), and trucks (Oshkosh Corp. (OSK) in consumer goods.
  • Focus on diversified investments (Morgan Stanley (MS), Nasdaq (NDAQ), money center banks (JPMorgan, Bank of America, Bank of NY (BK), and investment brokers (MarketAxess (MKTX), Raymond James (RJF), SEI Investments (SEIC), Charles Schwab (SCHW), Goldman Sachs (GS) in financials.
  • Healthcare plansgeneric drugs (Mylan (MYL), and medical appliances (Hologic (HOLX), Medtronic (MDT), Align Tech (ALGN)) are top rated in healthcare.
  • Industrial equipment (Pentair (PNR), Parker-Hannifin (PH)), industrial electrical (Eaton Corp., Rockwell Automation (ROK), Ametek (AME)), and general building (MDU Resources (MDU), Fastenal (FAST)) offer upside in industrial goods.
  • The strongest scoring services industries are truckingmanagement services, and auto parts stores.
  • Semi equipment (Teradyne (TER), Lam Research (LRCX), KLA Corp. (KLAC)), domestic telecom (AT&T (T)), and scientific & technical services (Agilent (A), Cognex (CGNX), Garmin (GRMN)) are top ranked in technology.
  • Electric utilities (Dominion Energy (D), Southern Co. (SO)) can also be bought.

We'll be rolling our scores to reflect 10-year first-quarter seasonality later this month. Paraphrasing Twain, history rhymes so we'll be sharing our entire individual stock seasonality database with members by Jan. 1. In the meantime, baskets offering the strongest seasonal tailwinds (using exchange-traded funds as proxy) include agribusiness, technology, and semiconductors. Our ETF seasonality report including seasonal trends for 50 widely-traded ETFs will be available through our service next week.


The next table shows the best and worst industries, descending by score and sector. The greatest potential returns can be found in strong stocks, within strong industries, within strong sectors.