Without a doubt, large-cap stocks have been performing much better than small-cap stocks since the beginning of this year. The Dow Jones Industrial Average, which is made up of all large-cap stocks, has climbed 2.5% so far this year, while the S&P 500, whose performance is primarily driven by several strong buy large-cap stocks, is up 4.6% in 2024. Conversely, the Russell 2000, which tracks small-cap stocks is down 4% so far in 2024.
Given this data, it seems as though investors’ phobia of small-cap companies that are not yet profitable, which took a highly justified hiatus late last year, has returned. Consequently, momentum traders and momentum investors should look to buy large-cap, highly profitable stocks whose issuers have strong balance sheets. Here are three strong buy large-cap stocks for them to consider.
IBM (IBM)
Driven by strong demand for its AI software and services, as well as its hybrid cloud offerings, IBM (NYSE:IBM) reported impressive fourth-quarter results on Jan. 25.
Specifically, its income from continuing operations climbed 14.5% year-over-year to $3.285 billion. Moreover, Big Blue’s free cash flow surged 1.7% year-over-year to $6.09 billion. Finally, the firm provided 2024 free cash flow guidance of $12 billion, well above Bank of America’s (NYSE:BAC) estimate of $11 billion to $11.5 billion.
IBM’s AI business is growing rapidly, as its bookings related to the technology soared 100% in Q4 versus Q3. With many companies quickly integrating AI and turning to IBM for help with doing so, the phenomenon should continue to provide a major positive catalyst for the firm’s profitability and for IBM stock going forward. This raid growth makes IBM one of the market’s strong buy large-cap stocks.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) develops computer chips for many different products, and it’s also a leader in the Wi-Fi and server storage sectors. Like IBM, AVGO has been a major beneficiary of the AI Revolution.
Indeed, JPMorgan (NYSE:JPM) recently began coverage of AVGO stock with an “overweight” rating, based on the strength of its AI chips business. Specifically, the bank expects the firm to benefit from strong demand for its chips used by datacenters which are both creating AI and facilitating much of its utilization at this point.
Moreover, Broadcom’s partnerships with both Meta (NASDAQ:META) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) should also boost its top and bottom lines in the medium-term and the long-term.
Also noteworthy is that AVGO has acquired Vmware, which should benefit from its alliance with the largest AI chipmaker, Nvidia (NASDAQ:NVDA). Additionally, VMware has made Broadcom less dependent on its four largest customers, decreasing the risk that it faces.
General Motors (GM)
General Motors (NYSE:GM) stock surged on Jan. 30 after the automaker delivered fourth-quarter results that came in significantly above analysts’ average estimates. While the shares have largely tread water since then, they do appear to have formed a bullish reverse head-and-shoulder pattern this month.
What’s more, as we get closer to the U.S. Federal Reserve cutting interest rates, I believe that the shares are likely too pop. That’s because lower rates makes buying vehicles much cheaper for the vast majority of purchasers who take out loans on them.
Another factor that could boost GM this year is the rapid winding down of the work-from-home phenomenon. As many more Americans resume commuting five days per week, the demand for GM’s vehicles should surge.
Bank of America has a $75 price target on the shares, far above their current level of around $39.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.