3 Top Mega-Cap Stocks Worth Buying in January

Because interest rates are still very low, many investors have been betting on small-cap stocks to capitalize on their companies' expansion. However, an expected interest rate hike does not bode well for small-cap stocks; mega-cap stocks could perform better. Since mega-cap stocks are known for delivering steady returns, it could be wise to bet on them now because the stock market is expected to remain volatile on concerns over high inflation, continued supply chain disruptions, and an anticipated increase in interest rates. Nicholas Colas, the co-founder of DataTrek Research, believes, “2022 will not be a bad year for U.S. large-cap stocks.”

Investors’ interest in the mega-cap space is evident from the Vanguard Mega Cap Growth Index Fund ETF’s (MGK) 4% returns over the past month and 12.1% returns over the past three months.

Therefore, we think fundamentally sound mega-cap stocks The Home Depot, Inc. (HD), The Procter & Gamble Company (PG), and Costco Wholesale Corporation (COST) could be solid bets now.

The Home Depot, Inc. (HD)

Atlanta, Ga.-based home improvement retailer HD sells various building materials, home improvement products, and lawn and garden products. It is the world’s largest home improvement retailer, operating roughly 2,300 stores across the U.S., Canada, and Mexico. It has a market capitalization of $431.10 billion.

On Dec. 28, 2021, HD enhanced its military discount benefit to include all U.S. veterans, active service members, and spouses every day. Ted Decker, president and COO of HD said, "We're proud to expand this Military Discount Benefit for families who have sacrificed so much for our country. From our product discount to The Home Depot Foundation's commitment to veteran causes, our dedication to our servicemen and women has never been stronger."

For the third quarter, ended Oct. 31, 2021, HD’s net sales increased 9.8% year-over-year to $36.82 billion. The company’s net earnings came in at $4.13 billion, representing a 20.3% year-over-year rise. In addition, its EPS increased 23.3% year-over-year to $3.92.

Analysts expect HD’s revenue to be $150.18 billion in fiscal 2022, representing a 13.7% year-over-year increase. Also, the company’s EPS is expected to rise 29.5% year-over-year to $15.46 in fiscal 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 56.4% in price to close yesterday’s trading session at $412.84.

HD’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which equated to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

In addition, it has a B grade for Sentiment and Quality. HD is ranked #23 of 61 stocks in the B-Rated Home Improvement & Goods industry. Click here to see the additional POWR Ratings for HD (Growth, Value, Momentum, and Stability).

The Procter & Gamble Company (PG)

PG in Cincinnati, Ohio, provides branded consumer packaged goods to consumers in North & Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. It operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. It has a $395.59 billion market capitalization.

On Oct. 19, 2021, David Taylor, Chairman, President, and CEO, said, “We delivered solid results in our first quarter of fiscal 2022 in a challenging cost and operating environment. These results keep us on track to deliver our top-line, bottom-line and cash targets for the fiscal year. We remain focused on executing our strategies of superiority, productivity, constructive disruption and continually improving P&G’s organization structure and culture.”

For its fiscal 2022 first quarter, ended September 30, 2021, PG’s net sales increased 5.3% year-over-year to $20.34 billion. The company’s cash and cash equivalents came in at $10.37 billion for the period ended Sept. 30, 2021, compared to $10.29 billion, for the period ended June 30, 2021. And its  total assets were  $119.67 billion, compared to $119.31 billion for the period ended June 30, 2021.

PG’s revenue is expected to be  $79.37 billion in its fiscal 2022, representing a 4.3% year-over-year rise. The company’s EPS is expected to increase 7.4% year-over-year to $6.36 in fiscal 2023. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 18.6% in price to close yesterday’s trading session at $163.47.

It is no surprise that PG has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Stability and Quality. PG is ranked #8 of 67 stocks in the Consumer Goods industry. Click here to see the additional POWR Ratings for PG (Growth, Value, Momentum, and Sentiment).

Costco Wholesale Corporation (COST)

Together with its subsidiaries, COST operates  membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. Its $250.20 billion market capitalization. COST is headquartered in Issaquah, Wash.

COST’s total revenue increased 16.6% year-over-year to $50.36 billion for its fiscal 2022 first quarter, ended Nov.21, 2021. Its net income was  $1.32 billion, up 13.6% year-over-year, and its EPS came in at $2.98, up 13.7% year-over-year.

For its fiscal year 2022, analysts expect COST’s revenue to be $217.82 billion, representing an 11.2% year-over-year rise. The company’s EPS is expected to increase 15.5% year-over-year to $12.81 in fiscal 2022. It surpassed the EPS estimates in three of four trailing quarters. Over the past year, the stock has gained 48.4% in price to close yesterday’s trading session at $564.23.

COST’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Growth, Stability, and Sentiment. Click here to see COST’s ratings for Value, Momentum, and Quality as well. COST is ranked #17 of 39 stocks in the A-Rated Grocery/Big Box Retailers industry.

HD shares were trading at $410.60 per share on Wednesday afternoon, down $2.24 (-0.54%). Year-to-date, HD has declined -1.06%, versus a 0.37% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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