Top Fund Managers Look to Large Caps

Jeremy Grantham isn’t the only successful investor who’s finding big values in big stocks.

Thomas Perkins and Donald Yacktman are among the investors with strong long-term track records now finding good buys in large-cap stocks, BusinessWeek reports. Perkins, whose Perkins Investment Management Mid-Cap Value fund has outperformed its peers by more than 4 percentage points over the past decade, says that large caps “have gotten so cheap that they should outperform for the next several years”. BusinessWeek says his fund is “almost at its limit for big-company shares”.

Yacktman (whose fund, BusinessWeek notes, has beaten all but 13 of more than 3,000 diversified U.S. funds over the past decade, according to Morningstar) is also high on bigger plays. Some of his top recent holdings have included Coca-Cola and Pfizer. Like Grantham, he’s also high on high-quality vs. “junk” stocks. He told BusinessWeek that investors “are not being paid to take more risk” with lower-quality stocks right now.

Perkins says that using projected earnings and cash flows, smaller stocks are expensive compared to large stocks. And Leuthold Group’s James Floyd says that the premium investors are currently paying for small-cap stocks (those with caps of $300 million to $1.4 billion) vs. large-cap stocks (those with caps over $9 billion) is the biggest since his firm started tracking the data in late 1982.

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