Shares in small companies are often seen as appealing to investors due to the perceived upside potential and exploitable pricing inefficiencies.
While this can be true, there’s also a lot of potential value in larger companies, especially after the recent correction.
Typical large companies often seen in share portfolios would be blue chips like Commonwealth Bank of Australia (ASX: CBA), Wesfarmers Ltd (ASX: WES), and Woolworths Group Ltd (ASX: WOW).
Here are three large-cap ASX shares I like at these levels.
Xero
Shares in cloud-based accounting software Xero Limited (ASX: XRO) have recovered over the last week or so, but are still down by roughly 23% from its highs at the start of the year.
XRO share price
The more I read into Xero, the more I start to realise just how attractive its business model is. Despite its $17.5 billion market capitalisation, further upside potential appears to be significant.
Xero’s platform is designed in a way that lets outside developers create third-party apps that are able to be integrated into Xero’s platform, improving it along the way. As the ecosystem grows in size, it can attract more developers, which improves its platform even more. This is known as a network effect.
A network effect is often seen as game-changing for successful tech companies and allows customer acquisition costs (CAC) to remain low or even decrease over time.
For more reading on Xero, click here to read: Down 28% in 3 months: Are Xero (ASX: XRO) shares in bargain territory?
Altium
Altium Limited (ASX: ALU) shares have also recovered recently, but are still trading roughly 32% lower than its highs last year.
The share price chart below would indicate not much has happened over the last year, but I think there’s a fairly compelling investment case for a long-term outlook.
Altium’s involved in software for the design of printed circuit boards (PCB). Its new Altium 365 platform will handle all stages of PCB design, with things like manufacturing, procurement and distribution being collaborated all at once.
This is another example of a potential network effect that could catapult Altium’s success in the years to come. If Altium 365 positions itself as the industry standard, it could reach a point where PCB manufacturers and distributors are highly motivated to use Altium’s platform as its value continues to rise as the userbase grows.
To read more about Altium, click here to read: Will ASX tech stocks crash in 2021? Here’s 1 ASX share I’d buy if they did.
CSL
Don’t let the $118 billion market capitalisation of CSL Limited (ASX: CSL) fool you. CSL has delivered market-beating returns consistently for years.
CSL has struggled recently due to a slowdown in plasma collections as a result of COVID-19. Additionally, an appreciating AUD and the stock trading ex-dividend hasn’t helped the share price in recent times.
The underlying fundamentals are still there in my view. It seems likely plasma donation volumes will normalise at some point and currency headwinds aren’t likely to be a permanent headwind.
Companies in the healthcare sector aren’t guaranteed to succeed by any means, but there’s a certain amount of stickiness to its operations given it creates life-saving medicines for those living with serious illnesses.
For more reading on CSL, click here: Share price squeezed: Is it time to scoop up CSL (ASX: CSL) shares?
