Despite investors’ rotation away from expensive growth stocks earlier this year, growth stocks have been attracting increasing investor attention lately as economic indicators suggest a bright future for them. While two interest rate hikes are expected in late 2023, the rates are being held near zero for now. So, the availability of cheap money should keep driving the growth of several companies.
Investors’ increasing interest in large-cap growth stocks is evident in the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 7.5% returns over the past month.
Large-cap stocks have been in favor due to their solid growth prospects amid the fast-paced economic recovery and their ability to generate steady long-term returns irrespective of short-term market fluctuations. Quality large-cap stocks Danaher Corporation (DHR) and Broadcom Inc. (AVGO) have the potential to become mega-cap players because of their market dominance and fundamental strength. So, we think it could be wise to bet on these two stocks now.
Danaher Corporation (DHR)
With a market capitalization of $198.68 billion, Washington, D.C.-based DHR designs, manufactures, and markets professional, medical, industrial, and commercial products and services worldwide. It operates through three segments: life sciences, diagnostics, and environmental & applied solutions.
The company announced on June 17 that it has agreed to acquire privately held Aldevron. Rainer M. Blair, DHR’s President and CEO, said “This acquisition will expand our capabilities into the important field of genomic medicine and help us support our customers and their critical mission to bring more life-saving therapies and vaccines to market faster."
DHR’s sales increased 57.9% year-over-year to $6.86 billion for its fiscal first quarter ended April 2, 2021. Its operating income grew 186.1% year-over-year to $2 billion, while its net earnings increased 186% year-over-year to $ 1.70 billion. The company’s non-GAAP EPS increased 140% year-over-year to $2.52. And its revenue and EPS have grown at CAGRs of 9.6% and 20.8%, respectively, over the past three years.
Analysts expect DHR’s EPS and revenue to increase 40.6% and 24.5%, respectively, year-over-year to $8.87 and $27.74 billion in 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has surged 53% over the past year to close yesterday’s trading session at $278.55.
DHR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment, and a B grade for Growth. Click here to access the additional POWR Ratings for DHR (Stability, Value, Momentum, and Quality). DHR is ranked #51 of 184 stocks in the Medical - Devices & Equipment industry.
Click here to checkout our Healthcare Sector Report for 2021
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies semiconductor infrastructure software solutions. The company's solutions enable customers to plan, develop, automate, manage, and secure applications across mainframe, distributed, mobile, and cloud platforms. It has a $194.17 billion market capitalization.
On June 15, AVGO introduced new, industry-first capabilities for Value Stream Management (VSM) in its ValueOps software portfolio, seamlessly combining the proven investment planning features of Clarity with the advanced agile management capabilities of Rally software. This launch is expected to further expand its product portfolio.
AVGO’s net revenue increased 15% year-over-year to $6.61 billion for its fiscal second quarter, ended May 2, 2021. Its adjusted EBITDA grew 23.4% year-over-year to $3.96 billion, while its non-GAAP net income increased 28.3% year-over-year to $2.98 billion. The company’s non-GAAP EPS increased 28.8% year-over-year to $6.62. And its revenue and EBITDA have grown at CAGRs of 9.2% and 14.9%, respectively, over the past three years.
For the current quarter, ending July 31, 2021, analysts expect AVGO’s EPS to come in at $6.85, representing a 26.9% year-over-year increase. It surpassed consensus EPS estimates in each of the trailing four quarters. The company’s annual revenue is expected to increase 14.1% year-over-year to $27.24 billion in 2021. The stock has gained 49.96% over the past year to close yesterday’s trading session at $469.54.
AVGO’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The stock has a B grade for Quality, Stability, Growth, and Sentiment.
Within the B-rated Semiconductor & Wireless Chip industry, AVGO is ranked #1 of 99 stocks. To see AVGO’s rating for Momentum and Value as well, click here.
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
DHR shares fell $3.79 (-1.36%) in premarket trading Thursday. Year-to-date, DHR has gained 25.61%, versus a 16.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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