Big Companies, Big Gains
Dec 31st 2012 4:15PM
Updated Dec 31st 2012 4:22PM
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some big-company stocks to your portfolio, the RevenueShares Large Cap ETF (NYS: RWL) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously. It's based on the S&P 500 and holds the same 500 stocks, but with a twist : It weights them by revenue, not by their market cap.
ETFs often sport lower expense ratios than their mutual fund cousins. The RevenueShares ETF's expense ratio -- its annual fee -- is a relatively low 0.49 %. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF is relatively young, but has modestly outperformed the S&P 500 over the past three years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why large companies?
Large companies can add some ballast to your collection. Many may not grow as briskly as their smaller counterparts, but in order to reach their current size, they likely have some strong assets and features. And some can grow quite briskly, too.
Plenty of large-cap companies performed strongly over the past year. Bank of America (NYS: BAC) more than doubled, having sold off non-core assets and strengthening its financial condition. It has also been shutting down lots of ATMs as it beefs up its mobile-transaction apps. Its troubled mortgage operations have been holding it back, and some see reasons to steer clear, while others see the company as attractive now.
Major oil refiner Valero Energy (NYS: VLO) surged 61% and is poised to profit from lower crude oil prices (because they mean lower input prices for refiners and thus higher profit margins). The company's fans like its solid fundamentals and growth prospects, but bears worry about possible fallout if fracking activities are reined in by regulations. Valero recently got permission to ship U.S. oil to a Canadian refinery, and has a new hydrocracking diesel production facility in operation.
Ford (NYS: F) gained 22%, having significantly pared down its debt and boosted its profit margins as it accelerates its growth in China and enjoys the beginning of a recovery in auto sales. The company expects to add 12,000 jobs in America by 2015, and has begun hiring already. Its green vehicles are selling well, too.
General Electric (NYS: GE) advanced 18%, as it expands into alternative energies and mining, while seeing certain divisions, such as GE Capital, get healthier. Its massive cash hoard gives it the ability to seize opportunities, but the stock isn't quite the bargain it was last year. It recently bought an LED lighting fixtures company and a key supplier for its aviation business.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
The article Big Companies, Big Gains originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Ford. The Motley Fool owns shares of Bank of America, Ford, and General Electric . Motley Fool newsletter services recommend Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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