Mega-cap stocks have propelled the S&P 500 and Nasdaq 100 toward new highs. These stocks make up the largest percentage of these weighted funds’ portfolios. It’s possible to pick the top mega-cap stocks and end up outperforming the stock market.
Many mega-cap stocks also offer safety. Most of these firms are household names that should withstand various economic cycles for many years. Many of them are also battle-tested and have withstood recessions. Mega-cap stocks consist of corporations that have market caps above $200 billion. These are some of the top picks to consider.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has the largest advertising platform on the planet. Many people use Google and YouTube to research information and access entertaining content. Both of these search engines have many uses, which attract advertisers.
Alphabet’s data collection is unmatched and makes it easy for the company to display targeted advertisements. That specialization results in better conversions for advertisers since their messages are getting in front of the right people.
Alphabet’s advertising segment generates the majority of total revenue, up by 13% year-over-year (YoY) in Q4 2023. Cost-cutting measures have also helped the company and resulted in a 52% YoY improvement in net income. Google Cloud has also been a key growth driver and grew at a faster rate than the company as a whole.
Artificial intelligence (AI) flubs distracted investors from Alphabet’s long-term potential, resulting in an unwarranted decline. However, investors are coming around, especially with Gemini not being as bad as feared. There are rumors that Apple (NASDAQ:AAPL) will use Gemini for its AI, which should strengthen Alphabet’s earnings.
Thanks to the rumors, Alphabet is now being touted as a clear winner in AI. It’s a sudden turn of events, but shouldn’t be a surprise since Alphabet does data collection better than almost every company on the planet. It has also been using AI for years to enhance its search engines.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) operates in several verticals. The two most well-known industries are its online marketplace and cloud computing. Prime Video and advertising are two segments investors should monitor thanks to their high growth rates, promising long-term profitability and how much the company is investing into them.
Amazon stock has been on a tear after a few years of mediocre returns. The stock is up by 80% over the past year and is already up by 18% year-to-date. Shares trade at a 61 P/E ratio thanks to double-digit revenue growth and expanding profit margins.
Amazon has received a chorus of positive support from Wall Street analysts rushing to assign higher price targets. The stock has a Strong Buy rating among 41 analysts. The average price target suggests a 17% upside from the current price. All 41 analysts rated the stock a Buy and the highest price target of $230 implies a 29% upside.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) also has a strong Wall Street contingent behind its stock. The Strong Buy consensus rating comes from 43 analysts. Only two analysts rated the stock as a Hold, and one analyst rated it as a Sell. The average price target implies a 7% upside, but the highest price target of $609 suggests a 23% gain.
Meta Platforms knows how to retain attention and ensure its users see more advertisements. Each of those ads allows the company to earn additional money. Meta Platforms’ total user base reached 3.19 billion daily active users across its family of apps in Q4 2023. That’s an 8% YoY increase. Monthly active users increased by 6% YoY to reach 3.98 billion.
The company also reported exceptional revenue and earnings growth. A 25% YoY improvement on the top line and a 201% YoY net income jump helped the company wrap up the fourth quarter nicely.
On this date of publication, Marc Guberti held a long position in GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.