Mega caps in high demand due to growth and stability
Our Mega Caps theme basket which consists of the 25 largest companies in the world representing $19.7trn in market value is the third best performing basket this year up 37%. In the past two months alone the basket has outperformed the MSCI World Index by 12.5% catapulting mega caps and the lack of breadth into recent market discussions with some market commentators saying it indicates a potential top in the equity market. Judging from history only the dot-com peak in market concentration marked a top, whereas the market concentration peak in 1977 did market a meaningful pivot point or market top.
For most of the year in presentations we have argued that investors should overweight mega caps as these companies can better transmit inflation to their customers due to market power. With rising inflationary outlook and ever more negative real rates investors are betting on sure things in equities and mega caps provide both high revenue growth (20% over the past year) and incredible stability in operating margins. Analysts remain positive on mega caps with price targets 13% above current prices.
Apple Inc | Technology Hardware | 2,944,128 | 33.3 | 72.0 | -4.4 |
Microsoft Corp | Software | 2,571,784 | 19.8 | 32.7 | 6.4 |
Amazon.com Inc | E-Commerce Discretionary | 1,746,738 | 31.6 | 49.7 | 19.5 |
Alphabet Inc | Internet Media & Services | 1,969,346 | 39.3 | 85.3 | 13.3 |
Meta Platforms Inc | Internet Media & Services | 917,285 | 42.2 | 59.6 | 21.3 |
Tencent Holdings Ltd | Internet Media & Services | 574,534 | 21.0 | -6.0 | 30.9 |
Alibaba Group Holding Ltd | E-Commerce Discretionary | 339,027 | 39.4 | 17.8 | 62.4 |
Tesla Inc | Automotive | 1,021,367 | 66.3 | 392.2 | -17.5 |
Taiwan Semiconductor Manufacturing Co Ltd | Semiconductors | 617,817 | 16.7 | 17.5 | 14.0 |
Berkshire Hathaway Inc | Insurance | 645,374 | 23.9 | 25.2 | 13.8 |
Visa Inc | Technology Services | 464,792 | 10.3 | -5.4 | 28.7 |
JPMorgan Chase & Co | Banking | 472,311 | -4.7 | 101.3 | 12.0 |
Samsung Electronics Co Ltd | Technology Hardware | 388,275 | 12.5 | 40.2 | 16.4 |
Johnson & Johnson | Biotech & Pharma | 435,668 | 13.1 | 18.5 | 12.7 |
Kweichow Moutai Co Ltd | Beverages | 418,062 | 11.1 | 12.6 | 4.7 |
Walmart Inc | Retail - Consumer Staples | 391,200 | 4.2 | 16.7 | 19.2 |
Mastercard Inc | Technology Services | 343,816 | 14.1 | 14.2 | 23.1 |
Walt Disney Co/The | Entertainment Content | 277,574 | 3.1 | 35.2 | 27.2 |
UnitedHealth Group Inc | Health Care Facilities & Svcs | 450,422 | 10.6 | -7.4 | 0.8 |
LVMH Moet Hennessy Louis Vuitton SE | Apparel & Textile Products | 406,300 | 16.9 | 101.7 | 5.4 |
Bank of America Corp | Banking | 364,355 | -7.7 | 59.4 | 10.8 |
Procter & Gamble Co/The | Household Products | 376,205 | 6.4 | 6.1 | -2.8 |
Nestle SA | Food | 381,059 | -3.7 | 5.6 | 1.5 |
NVIDIA Corp | Semiconductors | 754,950 | 64.3 | 87.1 | 14.6 |
Home Depot Inc/The | Retail - Discretionary | 433,777 | 17.6 | 30.1 | -2.5 |
Source: Bloomberg and Saxo Group
* Sales and EPS growth is measured on 12-month trailing figures, Diff to PT is the difference between consensus price target and the current price in %