3 best large-cap stocks to buy in August

Investors need large cap stocks in their portfolios. These proven companies provide the bulk of the index’s returns, as both S&P 500 and Nasdaq Composite are weighted by market capitalization. Large-cap stocks have also gained their massive sizes due to their track record of exceeding expectations and stable returns from patient investors.

The compromise has always been conceived as a sacrifice of growth for the stability of large cap stocks. But investors are increasingly rejecting this false narrative, as many large-cap tech stocks continue to show above-average growth rates. These three large-cap companies offer the stability of large-cap stocks, with above-average growth potential.

Amazon’s ‘slowing growth’ talk is too bearish

Amazon (NASDAQ: AMZN) has enriched many investors en route to a market cap of $ 1.7 trillion, including its founder Jeff Bezos, now the second richest man in the world. If you had invested $ 10,000 when it started out in the market in 1997, your stake would be worth over $ 20 million today!

That said, Amazon stocks are trailing the S&P 500 this year, posting a 3% return versus 17% for the index. Despite posting a 27% year-over-year increase in revenue, Amazon fell short of analysts’ expectations by a 29% pace. In addition, the company estimated third-quarter revenue to be $ 109 billion midway through, below consensus estimates of $ 119 billion.

After being accused of having zero profits for years, Amazon smashed earnings per share estimates by 23% despite being absent in the front row. Ironically, investors ignored the company’s increased profitability to focus on slower growth.

There are reasons for long-term investors to consider this noise. Pandemic lockdowns boosted e-commerce demand last year, making 2021 a difficult year for comparisons. However, Amazon’s higher-margin business segments like third-party vendor services (38%), AWS (37%), and subscription services (32%) all exceeded analysts’ expectations.

What’s exciting, however, is the company’s other catch-all division, which is primarily focused on advertising. In the quarter, revenue attributable to others increased 87% and is now half the size of AWS. Amazon’s temporary sale offered long-term investors an attractive entry point.

Slowing the growth of Facebook users is not a problem

Facebook‘s (NASDAQ: FB) Mark Zuckerberg isn’t as rich as Bezos, behind him around $ 70 billion, but at 37 he still has a long career ahead of him. Zuckerberg took Facebook from an idea to a market cap of $ 1,000 billion, and stocks are currently 840% higher than their IPO price of $ 38 nine years ago. And there are still long-term drivers for the business.

Facebook’s stock rally was halted due to second-quarter earnings, despite revenue growth of 56% and EPS of 101%, both above consensus estimates. Investors were disappointed with the company’s comments on revenue growth in the second half of 2021 and the fact that daily active users in the lucrative US and Canadian markets declined from the corresponding period of the year. ‘last year.

Like Amazon, Facebook is witnessing a return to normalcy after the pandemic. Social media use naturally exploded during the pandemic, and a return to more in-person events was always going to impact business engagement.

Despite the modest annual decline in the number of Daily Active Users (DAUs) (1.5%), the company still has 195 million people in the United States and Canada who log into a Facebook product daily and can monetize them. users by increasing the costs per ad, as it did. trimester.

Zuckerberg is now focusing on his most daring plans to date – the Metaverse. The company acquired virtual reality company Oculus in 2014 and plans to use its headsets to create a whole new virtual world for users. The upside potential could be greater than anything that has already been done.

Apple is getting stronger and stronger

By now, you may have identified a theme in the above stocks as all of them are mega-cap tech companies that have sold after earnings. In this context, Apple (NASDAQ: AAPL) is a natural fit, as the shares sold moderately after the company reported its third quarter tax results. Although its market capitalization is approaching $ 2.5 trillion, the company continues to have growth drivers.

Despite concerns that the iPhone market might be saturated, Apple increased its revenue attributable to the device by 50% from the previous year and increased its total revenue by 36%. Although Apple easily exceeded analysts’ expectations for revenue and earnings, investors reacted negatively to CEO Tim Cook’s comment that chip shortages could impact iPhone and iPad sales. during the current quarter.

While shortages are never ideal, in the short term this is an example of a “good problem”. Demand exceeding supply means your product is coveted, and many iPhone users are unlikely to step out of its ecosystem to buy an Android. In fact, it’s this sticky user base that will fuel Apple’s next phase of growth, as Apple has been aggressive in monetizing its installed base with subscription-based recurring services and revenue.

Service revenues increased 33% from the previous year, an acceleration from the 27% growth rate in the previous quarter. During the earnings call, Cook noted that the company had nearly 700 million subscribers, a 27% increase from the previous year. Ignore the short-term chip bottleneck, Apple has many growth levers to pull moving forward.