America's Biggest Companies Look Reasonably Priced

By Aryeh Katz | March 12, 2010 AAA

Last year at this time, many were talking about financial companies that were "too big to fail". It was all the bother at the time whether massive insurers and banks such as AIG (NYSE: AIG) and Bank of America (NYSE: BAC) could be allowed to slip into bankruptcy.

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For the most part, the government aided the biggest of the financials to avoid a broader credit meltdown. But would it have done the same for the companies listed below? The names we bring here are actually the biggest of the biggest companies as measured by market capitalization. They happen to be among the biggest publicly traded ventures on a global basis as well. And they both possess rather strong fundamentals at present. (Find out the difference between mega-, large-, mid- and small-cap stocks. We show how each suits particular investing styles. Check out Market Capitalization Defined.)

The Biggest Of Them All

Exxon Mobil (NYSE: XOM) is the largest publicly traded company in the U.S., with a market cap greater than $317 billion. The stock trades with a one-year trailing price/earnings multiple of 16.89 and offers investors a reasonable annual dividend of 2.5%. Year to date the shares are down almost 1.5%. But for those who bought exactly one year ago, the picture is only marginally brighter. XOM shares managed a mere 2.13% rise during that time frame.

In its latest earnings report, Exxon led the industry with outstanding figures. In 2009, the company earned $19.3 billion and generated cash flows of $28.4 billion, thus allowing the oil giant to pursue ongoing large-scale CAPEX projects. Investors might have been more impressed had the company not been handed a significant setback at about the same time. The Ghanaian government blocked a deal between Exxon Mobil and Kosmos Energy to acquire that country's Jubilee oil field.

Microsoft Making Macro Cash

Bill Gates's 1980s brainchild Microsoft (Nasdaq: MSFT) is now a full-grown monster stock, possessing a market cap in excess of $254 billion. Like XOM, the company pays a modest dividend of roughly 1.8% and trades with a comparable earnings multiple of 15.92 times last year's earnings.

Year to date, the company's shares are down nearly 5%, but they're up a firm 70% over the last 12 months. That compares well over the long term against the broad technology sector as measured by the PowerShares QQQ Trust (Nasdaq: QQQQ) ETF, which also gave investors a 70% return.

The Wrap

Kudos to these giants for offering investors both a reasonable dividend and strong, dependable earnings. When the ship gets this big and can still move and profit on a consistent basis, investors should take special note. (These monoliths helped develop the economy and infrastructure at the expense of competition. To learn more, check out Monopolies: Corporate Triumph And Treachery.)

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