Despite their outperformance in recent years, U.S. large-cap growth stocks continue to present attractive opportunities, says Wellington Management’s John A. Boselli, CFA, portfolio manager of John Hancock U.S. Quality Growth Fund. His investment team has identified a select group of dozens of large companies with strong organic revenue growth and healthy balance sheets.
While larger-cap U.S. growth stocks have outperformed markets over the last few years, we have built a portfolio of large-cap growth stocks that we think have substantial upside. The average company in our portfolio is growing 9% to 10% organic revenues over the next five to seven years in our forecast period, and the average company is generating about a 25% free cash flow margin as a percentage of sales. In addition, these companies have such strong balance sheets that they're able to allocate a substantial portion of their free cash flow each year back to investors through dividends and stock repurchases. We have found 50 large-cap growth stocks across the U.S. that we believe will outperform the markets over the next three to five years.