Large-cap value managers typically invest in companies which are industry leaders with solid business models, sustainable cash flow, conservative balance sheets, pay regular dividends, and are underappreciated by the broader market.
Large-cap equities also tend to offer steadier earnings growth than small-cap names, and, as value offerings, they are usually priced attractively. Moreover, since big companies keep extensive operations overseas, the weak U.S. dollar may actually be a windfall for them.
One of the best-performing large-cap value vehicles over the past year, the $98-million ING Large-Cap Value Fund, reflects the deep-value philosophy of its sub-adviser, Brandes Investment Partners.
The fund invests in stocks that are considered to be underpriced relative to their perceived long-term inherent value based upon fundamental analysis.
Top individual holdings include Ford Motor (4.6%); General Motors (4.6%); Verizon Communications (3.4%); Gannett Co. (3.4%); and Whirlpool (3.4%). By industry, Pharmaceuticals (14.4%), Auto Manufacturers (9.3%), Telecommunications (9.2%), Food (8.3%) and Computers (8.2%) account for the top allocations.
Another top fund in this arena, the $511-million John Hancock Large-Cap Equity Fund invests in companies that are selling at what “appear to be substantial discounts to their long-term intrinsic values and/or offer the potential for above-average earnings growth.”
As of March 31, energy (31.7%) and materials (24.2%) made up well more than half the fund’s assets, with health care (10.5%) a distant third.
Lead portfolio manager Timothy Keefe’s top individual holdings as of that date comprised Williams Cos. Inc. (5.5%); British Energy Group (5.1%); Suncor Energy (5.0%); Silver Standard Resources (5.0%); and Canadian Natural Resources Ltd. (4.4%).
Reflecting its global exposure, 35.6% of the fund’s assets are parked in foreign companies.