7 stocks that prove bigger is better in 2019
After a sharp decline to end 2018, the stock market has been in rally mode for the past several weeks. But whether this run will last is anyone’s guess.
The S&P 500 SPX, +0.07% is up an impressive 8% this year, thanks in part to some big earnings reports from high-profile names. That includes Facebook FB, -0.92% which gapped up double-digits after adding U.S. users.
But beneath the surface, there are still serious problems for Facebook amid privacy and fake-news controversies. And beyond this stock’s specific issues, there are broader market-wide concerns of slowing growth in 2019 and the risk political instability such as Brexit fallout, a global trade war or another government shutdown sapping the U.S. economy.
It’s hard to tell, then, whether the rally that started this year will persist. However, there is a small group of entrenched mega-stocks that are sure to come out ahead. Their dominance goes far beyond a simple calculation of their market cap, and ensures they can weather whatever the market throws their way.
Here are seven stocks that prove bigger companies are the way to go in 2019.
You simply can’t have a discussion about big-time stocks without including Walmart Inc. WMT, +0.65% a retailer that is in many ways synonymous with the biggest of big businesses. It tops the Fortune 500 with more than $500 billion in annual revenue, and is among the 15 largest S&P 500 components, with a market value of $280 billion.
While some may be doubtful of its dominance in a digital age, consider that WMT is the No. 3 e-commerce portal in the U.S. with a respectable 4% of total online retail spend. And as evidenced by its $3.3 billion purchase of Jet.com in 2016, Walmart isn’t afraid to keep investing in this crucial sales channel. And with roughly $30 billion in annual operating cash flow to help fund these efforts, you can be sure Walmart has the means to stay on top regardless of all the talk about e-commerce disruption.
Speaking of retail in a digital age, let’s move on to Amazon.com Inc. AMZN, +0.18% This pick is even bigger than Walmart, with a market cap of $790 billion and a price of around $1,600 per share. It’s among the three biggest companies in the U.S. But that dominance goes far beyond this headline metric.
Consider that, according to a 2018 report, roughly half of all e-commerce spending in the U.S. goes through Amazon.com — good for a 5% share of the entire nation’s retail spending. That’s a staggering tally! And while margins there are thin, it’s also worth noting that the tech giant’s Amazon Web Services cloud-computing arm is also dominant, with a market share of more than 30% — greater than the next four competitors combined. This is a company that clearly knows how to stay on top.
The largest U.S. corporation by market cap at this moment is software giant Microsoft MSFT, -0.40% But it’s not the $800 billion valuation that matters most, nor is it the $124 billion in projected 2019 revenue. Instead, it’s the company’s sheer dominance of enterprise market share.
Various instances of Windows command an 87% share of PC operating systems. And while second to aforementioned Amazon in cloud market share, Microsoft’s Azure is growing fast in this high-potential business segment. Sure, it’s not a go-to brand for anything mobile. But by maintaining its presence as a go-to technology name for businesses, MSFT has ensured it will remain relevant for many years to come.
Forget about any near-term volatility because of challenges to Apple Inc. AAPL, -0.58% earnings amid the iPhone sales plateau and challenges in China. Apple is neck-and-neck with Microsoft in market value, but also boasts more than $250 billion in annual revenue and a jaw-dropping cash hoard of almost $250 billion more to boot.
But the real testament to Apple’s scale is that its “services” segment revenue topped $10.8 billion last quarter. That means iTunes, the App Store and other AAPL venues generate enough sales for that services business alone to rank in the Fortune 100 — and neck-and-neck with the total top line of firms including drugmaker Merck MRK, -1.04% and investment bank Goldman Sachs GS, -0.18%
Among banks, J.P. Morgan Chase JPM, -0.47% is in a class by itself. Its market cap of $340 billion tops No. 2 Bank of America BAC, +0.42% by roughly $60 billion, and its $115 billion in annual revenue exceeds BAC’s by about $20 billion. It is the top bank as ranked by total assets and total deposits, but also ranked No. 1 in customer satisfaction among the six biggest U.S. banks, according to J.D. Power’s 2018 rankings.
Sure, there are plenty of clever new fintech firms that claim to be revolutionizing financial services in a digital age. But don’t count out JPM, which has invested heavily in the next generation of banking technology and boasted 48 million active digital customers in 2018 — with 36 million of those customers using mobile devices. Start-ups may see potential here, but JPM clearly already has the scale.
The biggest health-care company in the world, Johnson & Johnson JNJ, -0.30% is a $355 billion powerhouse that books over $80 billion in revenue and annual operating cash flow north of $20 billion, thanks to both branded treatments as well as consumer products like Tylenol and Band-Aid. But its size and influence goes far beyond these basic metrics or brand appeal.
Its annual dividend payments total a staggering $9.66 billion — on top of its current $5 billion share-repurchase plan. That’s a massive spend to drive shareholder value, matched by few other publicly traded companies. On top of that, in 2017 we saw JNJ make a massive $30 billion acquisition of Actelion in 2017 in a bid to further strengthen its position at the top of the pharmaceutical industry. Deep pockets and massive size like this ensures JNJ will weather any short-term trouble the market sends its way.
It may seem strange to finish this list with Boeing Co. BA, -0.24% After all, most people tend to think first of Big Tech, Big Banks or Big Pharma when they consider entrenched mega-corporations. But students of history will remember President Eisenhower’s warning of a “military industrial complex” — and will find a hard time arguing that Boeing isn’t the very personification of such an industry, with a market value of $230 billion and annual revenues north of $100 billion. On top of that, the company claims a total order backlog of $500 billion, ensuring a dominant position for the foreseeable future.
And interestingly enough, though the firm is regularly at the top of the list of government contractors, its share of revenue from its Defense, Space & Security segment has waned from roughly two-thirds of the top line 15 years ago to less than one-third at present. That shows BA is not just deeply entrenched at the federal level, but that it continues to expand its already impressive reach in the private sector.
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