Although solid third-quarter earnings, declining jobless claims, and rising consumer spending drove the markets to fresh highs last month, the emergence of a highly infectious new COVID-19 variant, high inflation, geopolitical tensions, supply chain constraints, and the Federal Reserve’s decision to taper its bond purchasing have been fostering worrisome market volatility of late. Because these factors are not likely to dissipate soon, betting on mega-cap stocks with exceptional growth potential and strong fundamentals could be an ideal strategy to hedge one’s investment portfolio against the expected market fluctuations.

Mega-cap stocks, which possess a market capitalization of $200 billion or more, have the potential to dodge short-term fluctuations and deliver stable returns. Also, favorable policies to encourage domestic production and ongoing efforts to address supply chain issues further enhance mega-cap stocks’ growth prospects.

Prominent mega-cap players UnitedHealth Group Incorporated (UNH), Walmart Inc. (WMT), Oracle Corporation (ORCL), Cisco Systems, Inc. (CSCO), and Broadcom Inc. (AVGO) have the potential to capitalize on their respective industry tailwinds and deliver stable returns. Given their solid combination of value and quality, we think these stocks can be reasonably characterized as “no-brainers.”

UnitedHealth Group Incorporated (UNH)

With a market cap of $420.08 billion, UNH in Minnetonka, Minn., is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. The company provides employers with products and resources to plan and administer employee benefit programs. It has a 0.77 beta.

On December 1, 2021, UNH introduced a new health plan that offers personalized and seamless customer support and the opportunity to save up to 15% on premiums to consumers in Southwest Arizona. By providing access to quality, affordable, patient-focused health care for people with employer-sponsored health coverage, UNH expects to witness high enrolment in  this plan in the coming months.

For its fiscal third quarter, ended September 30, 2021, UNH’s total revenues increased 11.9% year-over-year to $72.34 billion. The company’s earnings from operations came in at $5.71 billion for the quarter, representing a 22.8% year-over-year improvement. UNH’s adjusted net earnings were $4.32 billion, up 27.8% from their year-ago period. Its adjusted EPS increased 28.8% year-over-year to $4.52. The company had $21.09 billion in cash and cash equivalents as of September 30, 2021.

Analysts expect the stock’s EPS to increase 11.6% year-over-year to $18.84 in the current year. A $286.24 billion consensus revenue estimate for the current year represents an 11.3% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. UNH’s EPS is expected to grow at a 13.9% rate per annum over the next five years.

Over the past nine months, the stock has gained 32.8% in price and closed yesterday’s trading session at $446.02. UNH’s 1.57x forward EV/Sales is 73% lower than the 5.81x industry average. In terms of forward Price/Sales, UNH is currently trading at 1.47x, which is 78.6% lower than the 1.25x industry average.

UNH’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth, Sentiment, Stability, and Quality. Click here to see the additional ratings for UNH’s Value and Momentum. Of the 11 stocks in the B-rated Medical – Health Insurance industry, UNH is ranked #1.

Walmart Inc. (WMT)

WMT operates retail, wholesale, supermarkets, other units, and e-commerce websites worldwide. The Bentonville, Ark.-based company operates through Walmart U.S.; Walmart International; and Sam’s Club. In addition, it offers fuel and financial services and related products. It has a market capitalization of $377.76 billion and a  a 0.51 beta.

Following the U.S. Food and Drug Administration (FDA) and Centers for Disease Control and Prevention’s (CDC) authorization of Pfizer-BioNTech’s COVID-19 vaccine for children aged 5-11, on November 3, 2021, WMT and its Sam’s Club subsidiary announced they would administer the vaccine in more than 5,100 pharmacies nationwide. Offering the best services to help minors’ parents regarding the safety of and procedures for taking the vaccine, WMT expects to generate good sales in the coming months.

For its fiscal third quarter, ended October 31, 2021, WMT’s total revenues increased 4.3% year-over-year to $140.53 billion. The company’s operating $5.79 billion in income for the quarter indicates a marginal year-over-year improvement. WMT’s adjusted EPS increased 8.2% year-over-year to $1.45. The company had $16.11 billion in cash and equivalents as of October 31, 2021.

A $6.41 consensus EPS estimate for the current year represents a 17% rise from the prior-year period. Analysts expect WMT’s revenue to improve 2.3% year-over-year to $572.13 billion for the current year. It surpassed the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to grow at an 8.1% rate per annum over the next five years.

The stock has gained 4.4% in price over the past nine months and ended yesterday’s trading session at $135.47. WMT’s 0.76X forward EV/Sales is 60.1% lower than the 1.90x industry average. In terms of forward Price/Sales, WMT is currently trading at 0.66x, which is 51.2% lower than the 1.36x industry average.

It is no surprise that WMT has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Stability and Sentiment and a B grade for Growth, Value, and Quality. Click here to see the additional ratings for WMT’s Momentum.

WMT is ranked #4 of 40 stocks in the A-rated Grocery/Big Box Retailers industry.

Oracle Corporation (ORCL)

With a market capitalization of $246.01 billion, Redwood City, Calif.-based ORCL provides products and services that address all aspects of corporate IT environments, including application, platform, and infrastructure worldwide. The company operates through four segments—cloud services and license support; cloud license and on-premises license; hardware; and services. ORCL markets and sells its solutions directly to businesses in various industries, government agencies, educational institutions, and indirect channels. Its stock has an 0.80 beta.

On November 10, ORCL announced that it joined web infrastructure and website security provider Cloudflare, Inc.’s (NET) Bandwidth Alliance program as one of the 19 cloud providers committing to eliminating unnecessary data transfer fees. NET’s cybersecurity solutions and ORCL’s cloud infrastructure will help organizations save money automatically by avoiding the high data transfer fees that cloud providers charge outside the Bandwidth Alliance. ORCL is looking forward to providing an enhanced customer experience.

ORCL’s non-GAAP total revenues for its fiscal third quarter, ended August 31, 2021, increased 3.8% year-over-year to $9.73 billion. The company’s non-GAAP operating income came in at $4.33 billion, up 3.7% from the prior-year period. ORCL’s non-GAAP net income was $2.94 billion, indicating a 2.2% rise from its year-ago period. Its non-GAAP EPS increased 10.8% year-over-year to $1.03. As of August 31, 2021, the company had $23.06 billion in cash and cash equivalents.

Analysts expect the stock’s EPS to grow marginally year-over-year to $4.69 in the current year. The consensus revenue estimate of $42.25 billion for the current year represents a 4.4% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at an 8.7% rate per annum over the next five years.

Over the past nine months, the stock has gained 35% in price and closed yesterday’s trading session at $89.99. In terms of non-GAAP forward P/E, ORCL’s 19.18x is 20.8% lower than the 24.22x industry average. And in terms of forward EV/EBITDA, ORCL is currently trading at 13.48x, which is 16.1% lower than the 16.6x industry average.

ORCL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock has a B grade for Value, Stability, Sentiment, and Quality. Click here to see the additional ratings for ORCL’s Growth and Momentum.

ORCL is ranked #5 of 169 stocks in the Software – Application industry.

Click here to check out our Software Industry Report for 2021

Cisco Systems, Inc. (CSCO)

With a market cap of $236.82 billion, CSCO designs and manufactures Internet Protocol (IP) based networking products and services related to communications and information technology worldwide. The San Jose, Calif.-based company sells its products and services directly and through systems integrators, service providers, resellers, and distributors. It has a 0.90 beta.

On December 1, 2021, Datagroup, a leading Ukrainian telecom operator for business and home users, announced that it is building a secure and reliable high-speed data transmission network with CSCO’s Cisco Routed Optical Networking and Converged SDN Transport architecture solutions. This architecture will help Datagroup deploy one of the most flexible, automated, and efficient networks in the Ukrainian telecom market, integrate open data models and standard APIs, and simplify the commissioning of new services. CSCO’s total revenue for its fiscal first quarter, ended October 30, 2021, increased 8.1% year-over-year to $12.90 billion. The company’s non-GAAP gross profit came in at $8.32 billion, representing a 6% rise from the prior-year period. CSCO’s non-GAAP operating income was $4.29 billion, up 10% from the prior-year period. While its non-GAAP net income increased 8.2% year-over-year to $3.48 billion, its non-GAAP EPS increased 7.9% to $0.82. The company had $7.62 billion in cash and cash equivalents as of October 30, 2021.

Analysts expect CSCO’s EPS to rise 6.2% year-over-year to $3.42 in the current year. A $52.74 billion consensus revenue estimate for the current year represents a 5.9% rise from the prior-year period. CSCO surpassed the consensus EPS estimates in each of the trailing four quarters. PEP’s EPS is expected to grow at a 6.6% rate per annum over the next five years.

Over the past nine months, the stock has gained 23.4% in price and ended yesterday’s trading session at $56.15. CSCO’s 16.40x non-GAAP forward P/E is 33% lower than the 24.48x industry average. In terms of forward EV/EBITDA, CSCO is currently trading at 11.22x, which is 29.7% lower than the 15.97x industry average.

CSCO’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system. CSCO has an A grade for Quality, and a B grade for Stability. In addition to the POWR Ratings grades we have just highlighted, one can see CSCO’s Growth, Value, Momentum, and Sentiment here.

Of the 55 stocks in the Technology – Communication/Networking industry, CSCO is ranked #6.

Broadcom Inc. (AVGO)

With a market cap of $227.40 billion, AVGO designs, develops, and supplies a range of analog and digital semiconductor connectivity solutions and infrastructure software solutions. The San Jose, Calif.-based company develops semiconductor devices focusing on complex digital and mixed-signal complementary metal-oxide-semiconductor-based devices and analog III-V-based products. Its products are used in data center networking, home connectivity, broadband access, telecommunications equipment, smartphones, and base stations. Its stock has a 0.95 beta.

On November 9, Meta Platforms, Inc. (FB) announced it would deploy AVGO’s Broadcom StrataXGS Tomahawk 4 switch series, the world’s highest bandwidth Ethernet switch chip, into its industry-leading Wedge400 and Minipack2 networking platforms. The variety of SerDes speeds and bandwidth points provided by the Tomahawk4 devices enables direct connection to high-volume 200Gbps, 400Gbps, and 800Gbps optics and offers the lowest power per bit of throughput. AVGO is looking forward to continuing supporting FB’s transition to a leading-edge 25.6Tbps networking fabric.

For its fiscal third quarter, ended August 1, 2021, AVGO’s net revenue increased 16.4% year-over-year to $6.78 billion. The company’s non-GAAP gross profit came in at $5.09 billion, up 17.8% from the prior-year period. Its non-GAAP operating income was $3.95 billion, representing a 24% rise from the prior-year period. AVGO’s non-GAAP net income came in at $3.12 billion, up 28.3% from the year-ago period. And its non-GAAP EPS increased 28.9% year-over-year to $6.96. The company had $11.11 billion in cash and cash equivalents as of August 1, 2021.

Analysts expect AVGO’s EPS to improve 26.1% year-over-year to $27.94 in the current year. A $27.41 billion consensus revenue estimate for the current year represents a 14.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a 14.7% rate per annum over the next five years.

The stock gained 15% in price over the past nine months and closed yesterday’s trading session at $99.60. AVGO’s 19.75x non-GAAP forward P/E is 19.3% lower than the 24.48x industry average. In terms of forward EV/EBITDA, AVGO is currently trading at 15.67x, which is 1.9% lower than the 15.97x industry average.

AVGO’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock has an A grade for Momentum and a B grade for Growth, Stability, Sentiment, and Quality. Click here to see the additional ratings for AVGO’s Value.

AVGO is ranked #1 of 100 stocks in the A-rated Semiconductor & Wireless Chip industry.

Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in AVGO] for a 25% gain. Learn more about the RTR service here.

Click here to checkout our Semiconductor Industry Report for 2021

UNH shares were trading at $446.36 per share on Friday afternoon, up $0.34 (+0.08%). Year-to-date, UNH has gained 28.65%, versus a 21.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

More Resources for the Stocks in this Article