Large-cap stocks usually command their industries because they have the scale to drive market trends. The flip side though is that their sheer size can limit growth as expanding further becomes an increasingly challenging task.
This is precisely where StockStory comes in – our job is to find you high-quality companies that can win regardless of the conditions. That said, here are two large-cap stocks whose competitive advantages create flywheel effects and one whose existing offerings may be tapped out.
Market Cap: $144.8 billion
Headquartered in Dallas, Texas since the 1950s, Texas Instruments (NASDAQ:TXN) is the world’s largest producer of analog semiconductors.
Why Are We Wary of TXN?
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Sales tumbled by 2.4% annually over the last two years, showing market trends are working against its favor during this cycle
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Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 13.5 percentage points
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Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 28.5 percentage points
Texas Instruments is trading at $159.49 per share, or 27.3x forward P/E. Dive into our free research report to see why there are better opportunities than TXN.
Market Cap: $33.64 billion
Formed through the merger of 12 companies, Comfort Systems (NYSE:FIX) provides mechanical and electrical contracting services.
Why Are We Backing FIX?
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Sales pipeline is in good shape as its backlog averaged 33.6% growth over the past two years
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Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
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Returns on capital are growing as management capitalizes on its market opportunities
At $952.20 per share, Comfort Systems trades at 32.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Market Cap: $35.58 billion
Founded in 2005 by two University of Virginia roommates, Reddit (NYSE:RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.
Why Do We Love RDDT?
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Domestic Daily Active Visitors have increased by an average of 32.3% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
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Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 40.3% annually
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Free cash flow margin expanded by 41.8 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
