The Lions of Large Cap. It’s a great name, but what does it actually mean? RBC Capital uses this term to describe the most frequently owned stocks in large cap core, growth, and value funds.
In other words, these are the top stocks based on the total number of funds across all styles that own the stock.
To put together this list, RBC analyzed the 3Q18 stock-level holdings of a broad sample of 751 actively managed, diversified US equity funds focused on Large Cap investing.
So what’s the value of the report? Not only does this report provide color on where crowded trades lie and how positioning is set up and changing, but it also offers fresh investing inspiration.
For example, The Rising Sun (!) stocks represent the most new positions added by large cap funds. Interestingly, 4 of these 10 stocks come from the healthcare sector- with only 2 from tech. This is in direct contrast to the Lions which are heavily tech focused.
We will take a look now at the most compelling stocks from both these 2 groups of stocks. Plus, using TipRanks data, we can see how analysts see these stocks performing going into 2019.
First the Lions:
1. Microsoft (MSFT– Research Report)
70% of large cap funds own Microsoft- making it the number 1 most popular stock. Meanwhile 8 funds added MSFT to their holdings in the third quarter. Luckily this stock has a ‘Strong Buy’ Street consensus, with 20% upside potential to the average analyst price target. Shares have surged 21% year-to-date.
“An increasing mix of recurring subscription and cloud services revenue at Microsoft should help sustain double-digit growth for several years” cheers top KeyBanc analyst Brent Bracelin (Track Record & Ratings).
For example, commercial cloud revenue alone could grow 43% to $38B this year (30% of revenue). Bottom line: “Overweight MSFT as a core growth holding for large-cap investors; we see FCF power of $6/share within two years.” See what other Top Analysts are saying about MSFT.
2. Cisco (CSCO– Research Report)
Tech giant CSCO saw double digit increases in fund ownership during 3Q18. This was the biggest increase across the Lions of Large Cap. Following these moves, almost half of large cap funds hold the stock.
From the Street, Cisco also boasts significant support. Like MSFT, this is a ‘Strong Buy’ stock with upside potential of over 20%. Year-to-date, shares are trading up 13%.
“We believe significant upside exists from current levels and continue to recommend purchase” is the latest word from five-star Tigress Financial analyst Ivan Feinseth (Track Record & Ratings).
Most importantly, CSCO is benefiting from rapid growth of its IT and data security service offerings. “CSCO continues to benefit from growth in IT spending, and the transition to a software- and services-based subscription model is driving increasing economic profit growth” the analyst explains. See what other Top Analysts are saying about CSCO.
3. Visa (V– Research Report)
Financial giant Visa also gets the thumbs up from the funds. Notably 7 large cap funds added V to their portfolios in the last quarter. Now 45% of funds hold Visa stock. For comparison, this is just behind FB at 47% and places Visa in 6th place of top fund holdings.
Also note that this is the no 1 stock for growth funds- with 80% of growth funds owning Visa.
This bullish outlook is echoed by the Street. We have a ‘Strong Buy’ consensus and 28% upside ahead. Bear in mind, shares are already up 15% year-to-date.
Strong growth continues, cheers top Cantor Fitzgerald analyst Joseph Foresi (Track Record & Ratings) on Visa stock.
He writes: “Our Overweight rating is based on the company’s leading position in the card network industry and its significant opportunities for growth internationally and digitally. We value Visa at a premium to the group, due to its above-average industry growth rates, superior margins, and business profile.” See what other Top Analysts are saying about V.
Now let’s pivot to The Rising Suns:
1. HCA Healthcare (HCA– Research Report)
HCA is the largest hospital operator in the US. It provides services through a network of acute care hospitals, outpatient facilities, and other settings.
This is the stock with the most new positions added by large cap funds. In fact, in the third quarter a whopping 26 funds added HCA stock. Now 11% of funds own the stock.
Oppenheimer’s Michael Wiederhorn (Track Record & Ratings) is betting on HCA as a solid long-term stock pick. He believes the hospital industry should continue to benefit from improved admissions growth and payer mix thanks to the Affordable Care Act.
Plus, HCA has continued to boast stronger operations than peers with robust same-store growth and strong cost management. “Given that these trends show no signs of slowing… we believe HCA remains the premier hospital company and maintain an Outperform rating” sums up the analyst.
And the Street is even more bullish. This ‘Strong Buy’ stock has a $156 average price target (27% upside potential). Note that shares have already surged 39% year-to-date. See what other Top Analysts are saying about HCA.
2. WellCare Health Plans (WCG– Research Report)
Closely following HCA is WellCare Health Plans. WellCare provides managed care health plans (primarily through Medicaid, Medicare Advantage and Medicare Prescription Drug plans) for over 4.4 million members.
RBC reveals that 24 funds added WCG in the last quarter, while Goldman Sachs has also just upgraded the stock from Buy to Conviction Buy. Goldman analyst Stephen Tanal (Track Record & Ratings) explains that he finds the stock particularly compelling at current levels.
Indeed, this stock has a ‘Strong Buy’ rating from top analysts. It is also heading for 42% upside potential according to the average analyst price target. This is following a 14% year-to-date gain. See what other Top Analysts are saying about WCG.
3. Illumina (ILMN– Research Report)
Illumina is a global leader in genomics, grappling with questions like ‘what causes cancer cells to mutate.” Funds are demonstrating confidence in the stock’s outlook, with 18 funds initiating ILMN positions in 3Q18. Shares have surged 39% year-to-date.
Meanwhile Canaccord Genuity’s Mark Massaro (Track Record & Ratings) has just reiterated his buy rating on the stock.
The analyst recently wrote: “We would buy ILMN right here, as ILMN, the dominant leader in sequencing, is powering huge population sequencing projects around the world at a scale never seen before.”
In total, 7 out of 7 top analysts rate the stock a ‘Buy.’ That’s with a $372 average analyst price target (23% upside potential). See what other Top Analysts are saying about ILMN.
Enjoy Research Reports on the Stocks in this Article:
HCA Healthcare (HCA) Research Report
Illumina (ILMN) Research Report
Microsoft (MSFT) Research Report
WellCare Health Plans (WCG) Research Report
Find fresh investing inspiration with the TipRanks Analysts’ Top Stocks tool. This tool gives you the lowdown on the most popular stocks from the Street’s top analysts. These are the analysts that consistently outperform. You can find ‘Strong Buy’ stocks in the sector that interests you now. Go to Analysts’ Top Stocks now.
