Get Your Big and Undervalued Stocks Here: Valero Energy Corporation (VLO), Ford Motor Company (F)

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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some large stocks to your portfolio, the PowerShares Fundamental Pure Large Value Portfolio ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF’s expense ratio — its annual fee — is a low 0.39%, and it recently yielded 2.1%. The fund is very small, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

Valero Energy Corporation (NYSE:VLO)This ETF is too young to have a meaningful track record to assess, though it did outperform the S&P 500 handily in 2012. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why large companies?
Large companies can add some ballast to your collection. Many may not grow as briskly as their smaller counterparts, but in order to reach their current size, they likely have some strong assets and features. And some can grow quite briskly. This ETF focuses on ones that seem undervalued according to some measures, which can boost the overall margin of safety for the basket.

More than a handful of large companies had strong performances over the past year. Oil and gas refining and marketing concern Valero Energy Corporation (NYSE:VLO) soared 83%, while its peer Phillips 66 (NYSE:PSX) is near the top of its 52-week range. Both companies have been profiting by processing cheap U.S. oil and then selling it at higher prices in Latin America and Europe — thereby helping keep fuel prices in the U.S. high. Phillips management recently signaled confidence via a dividend hike of about 25%.

General Electric Company (NYSE:GE) gained 25%, with its dividend yield of 3.2% topping both refiners above. That dividend is likely to keep growing — GE is sitting on a lot of cash. The company is extending its diversification further, as it expands into relatively new areas such as 3-D printing and the “industrial Internet,” not to mention its enhanced focus on mining and alternative energies. GE is also expanding geographically, for example, in Asia, where it’s now tackling the Japanese health-care market.

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