Big Companies


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Most of you may have noticed that I usually write about small companies. Although I’m vested in United Health, which is the largest company I own, I don’t bother writing my own analysis on them. There are already too many analysts and individual investors writing about the company that I just don’t feel the need.

A Big Herd

The number of analysts covering UNH, MSFT, AAPL, FSLR, INTC are 14, 19, 22, 20 and 32 respectively. The greater the number of analysts, these companies are subject to greater coverage and headlines. However, with so many analysts covering the same company, I find it hard to believe that there are going to be 20-30 different views and conclusions.

Small Moves

Big companies offer some attractive opportunities if the company follows a series of misfortunes, and then as it recovers, big moves can occur, but this is the exception rather than the rule.

The reason people refer to blue chips as “stable” and “non risky” is because they don’t drop much in price. Conversely, they don’t go up much either.

The only reason I would put my money into Exxon Mobil, Microsoft, GE or Walmart without waiting for a big drop is so that I can

  1. beat the GDP
  2. hopefully stay above inflation
  3. anchor my portfolio to ease my emotions in rough times (but proven lately that this isn’t always the case)

I don’t invest in large companies hoping to triple or quadruple my money.

Hard to Please The Street

Regarding GE, minus their struggling reinsurance unit of late, this is a company that has done so many things right. They expanded into virtually every business and came out on top yet for the past 8 years, the stock price has been declining. With so many shares outstanding (9.95billion), even the EPS is too diluted to get analysts and the Street excited. GE just continues to inch along at best.

Everything else being equal, you’ll do better with the smaller companies.

Disclosure

No positions in any companies mentioned

[tags]big companies, blue chips,ko,ibm[/tags]

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