Commentators, analysts, portfolio managers et al on financial media are frequently pointing investors to the Large Cap sector as a safehaven for a potential decline in the market. Months ago, they finally started suggesting that it was now safe to get into Large Caps and the multi-year Small Cap run was over. But at that point, the idea was that there were excess gains to be found in the biggies and now the spin is that they are safer than Mid Caps or Small Caps. Which story is correct? Is either rationale a good reason for putting money into Large Caps right now? Whenever I see the same recommendation for different purposes over such a short time, I get a little nervous.

Members can go to the EVALUATE section and select Large Caps from the Size criteria and you will see what I am talking about. Non-members can either register for a FREE TRIAL or just look at the summary data on the ANALYZE - STOCKS section or take my word for it (not as good of a choice!) You will see that almost exactly 50% of the 397 Large Caps have DOWN signals with 119 of 200 given in the past 4 weeks. During the same period, only 45 UP signals were Large Caps. Clearly, my opinions are not consistent with most of the smarties advising the investing public.

So I decided to analyze further and look at the actual charts of the Large Caps to see if I was missing something. Of the 199 Large Cap UPs, I see most of them as closer to a top than a bottom. The average gain of the UPs was about 15% and the average position was held for 14 weeks. That just doesn’t sound like a good entry point for new positions to me. However, when I look at the DOWNs, many of them are just beginning the negative trend with an average decline of 2% and an average hold period of 7 weeks.

Based on looking at all the charts and related time / performance statistics, I still disagree with the majority of Large Cap enthusiasts. I am not saying that there are no good positions to be had in the biggies, but it isn’t a “sure thing” like you may be hearing elsewhere. Entry positions are unique to each stock and you should evaluate each one independent of what style or size criteria is being hyped on any given day, week or month. If Large Caps were exciting candidates for either safehavens or capital appreciation opportunities, I would be seeing something like 75% UP signals in this category with gains less than 5% and holding periods less than 4 weeks. That is not the case, but I will be sure to let you know when (or if) I ever see a particular style or size criteria that looks overwhelmingly strong or weak. Until then, please don’t chase after Large Caps just because they are Large Caps.