American International Group Inc (AIG), Ford Motor Company (F), General Motors Company (GM): The Time To Rotate Into Mega-Cap Stocks Is Now

The Standouts
I’m partial to a few mega-caps in particular, starting with American International Group Inc (NYSE:AIG), which I profiled a few weeks ago.

The insurer just announced its first dividend since the global crisis took root, and by math, the payout should rise smartly in coming years.

I also remain a huge fan of both Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), which I also discussed recently.

Over in the technology sector, I still see further upside for Cisco Systems, Inc. (NASDAQ:CSCO) even as shares have risen roughly 30% thus far in 2013.

If you prefer to go the exchange-traded fund (ETF) route, then the iShares S&P 100 Index ETF (NYSE:OEF) is a solid choice. Vanguard gives investors two ways to invest in the theme: the Vanguard Mega Cap 300 Growth Index ET (NYSE:MGK) and the Vanguard Mega Cap 300 Value Index ETF (NYSE:MGV). The latter fund may hold greater appeal, not just because it has lagged the major indices over the past five years, but also because “large-cap value stocks (low price/book) have outpaced their growth counterparts by roughly 2% annualized, from 1927 through 2012,” according to Morningstar.

Risks to Consider: Mega-caps may remain out of favor if investors continue to favor higher-beta assets that are perceived as bull market winners.

Action to Take –> The seemingly never-ending surge for this bull market has a whiff of mania about it — yet at some point, the current momentum investing trend will peter out. When that happens, investors are likely to take note of the relative value and safety that mega-caps offer.

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– David Sterman

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