Is the Large Cap Trade Too Crowded?


We're a nation consumed with size. Large and in charge. Bigger is better. Supersize Me. Wherever you turn, it seems there's another pitch for something El Grande. And it's a trend that hasn't passed by Keith Wirtz, the Chief Investment Officer of Fifth Third Asset Management either. His current focus is on - you guessed it - large quality stocks even though some would argue that's a conventional and crowded trade right now.

"We don't see it that way" Wirtz says, adding that the rally since March 2009 has been lead by small caps and mid cap for much of that time, and that comparatively, relatively large caps are still cheap. He's very comfortable with a forward Price-Earnings ratio in the low to mid teens and feels the stability and predictability that big multinationals can provide make them the place to be in times of uncertainty and transition.

"Three years into a recovery and we think you want to migrate away from beta," Wirtz says, pointing to the risk appetite and volatility that have heralded the markets rebound from S&P 500 at 666 to 1350.

He cites Health Care as one example of a sector that is coming on strong now, after it lagged in 2010. Despite threats of Federal budget cuts, Wirtz says it's "probably already discounted in the stock". He says AmerisourceBergen (ABC) is "enjoying a product cycle of generics" that will do better in a cost cutting environment.

He also thinks Technology is worth a look since it has the single-largest percentage of foreign sales of any sector and reveals a soft spot for Industrials too. "Especially if you have conviction on global growth for the next 3 to 5 years," says Wirtz.

One pick here would be Parker Hannifin (PH), a pump-maker that has exposure to Asia, energy, and of course global growth.

On the other end of his ''risk barbell'' he likes the steady stream of profits and dividends from Procter & Gamble (PG).

What do you think? Is it time to ramp up risk or hunker down and hide?

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