Most large-cap companies have a proven history of fundamental stability regardless of economic conditions, making them secure investments for investors. A broader market reach, strong pricing power, and high liquidity help these stocks perform steadily.
Although inflation eased slightly in October, the job market remains tight. Moreover, the Federal Reserve has indicated that the final level of interest rates will be higher than expected. This is expected to push the economy into a recession next year.
Given this backdrop, investors could consider buying fundamentally strong large-cap stocks Microsoft Corporation (MSFT), UnitedHealth Group Incorporated (UNH), Taiwan Semiconductor Manufacturing Company Limited (TSM), and Broadcom Inc. (AVGO) to ensure stable returns.
Microsoft Corporation (MSFT)
MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. It has a market capitalization of $1.83 trillion.
Over the last three years, MSFT’s dividend payouts have grown at a 10.4% CAGR. Its four-year average dividend yield is 1.05%, and its forward annual dividend of $2.72 per share translates to a 1.11% yield. It is expected to pay a quarterly dividend of $0.68 per share on March 9, 2023.
On November 16, 2022, Lockheed Martin (LMT) and MSFT announced a strategic relationship to help power the next generation of technology for the Department of Defense.
MSFT’s executive VP, Strategic Missions and Technologies, Jason Zander, believes that the partnership with LMT demonstrates how the defense industrial base can bring classified data into the cloud securely while bringing advanced 5G connectivity, critical data processing and analysis, and immersive experiences to the edge to support decision-making.
For the fiscal quarter ended September 30, 2022, MSFT’s total revenues increased 10.6% year-over-year to $50.12 billion. The company’s operating income increased 6.3% from the prior-year period to $21.52 billion.
Its adjusted net income increased 2% year-over-year to $17.56 billion. Also, its adjusted EPS came in at $2.35, representing an increase of 3.5% year-over-year. In addition, its gross margin increased 9.5% year-over-year to $34.67 billion.
MSFT’s EPS for the quarter ending March 31, 2023, is expected to increase 6.1% year-over-year to $2.36. Its revenue for the quarter ending December 31, 2022, is expected to increase 3% year-over-year to $53.25 billion.
It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 9.3% over the past month to close the last trading session at $245.42.
MSFT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
Within the Software - Business industry, it is ranked #9 out of 52 stocks. The company has a B grade for Stability, Sentiment, and Quality.
Click here to see the additional ratings of MSFT for Growth, Value, and Momentum.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx. It has a market capitalization of $503.80 billion.
Over the last three years, UNH’s dividend payouts have grown at a 15.6% CAGR. Its four-year average dividend yield is 1.36%, and its forward annual dividend of $6.60 per share translates to a 1.22% yield. It is expected to pay a quarterly dividend of $1.65 per share on December 13, 2022.
On December 01, 2022, UNH announced a three-year, $3.1 million grant partnership with the American Nurses Foundation to fight nurse burnout with the Stress & Burnout Prevention Pilot program.
The program is designed to transform organizational culture, remove the stigma associated with seeking mental health support and offer nurses a new burnout prevention model. The partnership works to advance health equity by ensuring every person, regardless of race, place, or circumstance, has the opportunity to live their healthiest life.
UNH’s total assets increased 14.5% to $243.06 billion for the third quarter ended September 30, 2022, compared to $212.21 billion as of December 31, 2021. The company’s total revenues increased 11.8% year-over-year to $80.89 billion.
Adjusted net earnings attributable to UNH common shareholders increased 27.2% year-over-year to $5.49 billion. In addition, its adjusted EPS came in at $5.79, representing a 28.1% increase from the prior-year quarter.
UNH’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 15.5% and 11.9% year-over-year to $5.17 and $82.52 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 13.9% to close the last trading session at $539.20.
It is no surprise that UNH has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
Within the A-rated Medical - Health Insurance industry, it is ranked #2 out of 11 stocks. The company has a B grade for Growth, Stability, Sentiment, and Quality.
Click here to see the additional ratings of UNH for Value and Momentum.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices worldwide. It provides complementary metal oxide silicon wafer fabrication processes to manufacture logic, mixed-signal, radio frequency, and embedded memory semiconductors. It has a market capitalization of $418.47 billion.
Over the last three years, TSM’s dividend payouts have grown at a 5.3% CAGR. Its four-year average dividend yield is 2.51%, and its trailing twelve months dividend of $1.87 per share translates to a 2.32% yield. It is expected to pay a quarterly dividend of $0.45 per share on January 12, 2023.
TSM’s net revenue for the fiscal third quarter ended September 30, 2022, increased 47.9% year-over-year to NT$ 613.14 billion ($19.96 billion). Its income from operations increased 81.5% year-over-year to NT$ 310.32 billion ($10.10 billion). Its net income increased 79.6% year-over-year to NT$ 280.97 billion ($9.14 billion). In addition, its EPS came in at NT$10.83, representing a 79.8% increase from the prior-year quarter.
Analysts expect TSM’s EPS and revenue for the quarter ending December 31, 2022, to increase 53.1% and 31.5% year-over-year to $1.76 and $20.84 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 24.1% to close the last trading session at $80.69.
TSM’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. Within the Semiconductor & Wireless Chip industry, it is ranked #12 out of 93 stocks. The company has an A grade for Quality and a B for Sentiment.
To see the other ratings of TSM for Growth, Value, Momentum, and Stability, click here.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies various semiconductor devices focusing on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions, and Infrastructure Software. It has a market capitalization of $220.62 billion.
Over the last three years, AVGO’s dividend payouts have grown at a 15.7% CAGR. Its four-year average dividend yield is 3.23%, and its forward annual dividend of $18.40 per share translates to a 3.38% yield. It is expected to pay a quarterly dividend of $4.60 per share on December 30, 2022.
On August 22, 2022, AVGO and Tencent Holdings Ltd. announced a strategic partnership to accelerate the adoption of high bandwidth co-packaged optics network switches for cloud infrastructure.
AVGO’s VP and General Manager of the Optical Systems Division, Near Margalit, expects to continue to innovate and extend the company’s market leadership position with Tencent as AVGO migrates to 51.2-Tbps switch CPOs and next-generation 200G/lane PAM-4 applications.
AVGO’s non-GAAP net revenue for the fiscal fourth quarter ended October 30, 2022, increased 20.6% year-over-year to $8.93 billion. The company’s non-GAAP net income increased 29.8% year-over-year to $4.54 billion. Its adjusted EBITDA increased 25.8% year-over-year to $5.72 billion. Additionally, its non-GAAP EPS came in at $10.45, representing a 33.8% increase from the year-ago period.
AVGO’s EPS and revenue for the quarter ending January 31, 2023, are expected to increase 21.4% and 15.6% year-over-year to $10.18 and $8.90 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 16% to close the last trading session at $544.72.
AVGO’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of B, which equates to a Buy. It is ranked #14 in the Semiconductor & Wireless Chip industry. In addition, it has an A grade for Quality and a B for Growth.
Click here to see the additional ratings of AVGO for Value, Momentum, Stability, and Sentiment.
MSFT shares were trading at $250.79 per share on Monday afternoon, up $5.37 (+2.19%). Year-to-date, MSFT has declined -24.73%, versus a -15.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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