What are ASX large-cap shares?
Large-cap shares are generally well-established businesses with a stable history, so investors see them as less risky.
Of the more than 2,000 companies listed on the Australian Securities Exchange, large-cap shares have the largest market capitalisations. The 50 biggest ASX shares boast market caps ranging from the tens of billions to more than $250 billion.
There are no hard and fast rules about what constitutes a large-, mid-, and small-cap ASX share. It is generally agreed, however, that the 50 biggest stocks on the ASX by market cap are large-cap shares.
The next 50 biggest shares on the ASX by market cap are considered mid-cap companies. These have market capitalisations between $2 billion and $10 billion. ASX small-cap stocks are those that sit outside the S&P/ASX 100 Index (ASX: XTO).
Why invest in them?
Large-cap stocks can provide investors with unique advantages. These include certainty in valuations, steady dividend payments, and stability. Really significant large-cap companies are typically giants of their industries and well-established, which means they are less likely to face an economic circumstance that forces them to stop trading or renders them insolvent. This means large-cap shares can add valuable stability to a diversified portfolio.
Large-cap shares are generally well-established in the market, which means stock prices can be relatively stagnant or slow to increase. But large-cap shares do tend to pay dividends. When dividend returns are tallied over time, and any capital growth is factored in, the total returns from large-cap shares can be impressive. Large-cap stocks tend to be favoured by income investors and those with a relatively conservative risk profile.
Large-cap shares may not have the same potential as smaller-cap shares for capital growth. This is because they are starting from a higher base. However, large-cap shares are considered less risky than their smaller counterparts. This means there is generally less risk of loss to an investor.
Top large-cap shares on the ASX
The top 50 Australian equities by market capitalisation are mostly household names, including our largest banks, the mining behemoths, grocery giants, and healthcare titans.
The three largest shares on the ASX (below, ranked by market cap from high to low) are involved in the mining, banking, and pharmaceutical/biomedical industries.
| Company | Description |
| BHP Group Ltd (ASX: BHP) | BHP is one of the world’s top commodities producers with operations in five Australian states as well as Canada, Chile, Peru, the United States, Columbia, and Brazil |
| Commonwealth Bank of Australia (ASX: CBA) | CBA is Australia’s biggest bank, providing a range of financial products and services to retail, business, and institutional customers |
| CSL Limited (ASX: CSL) | CSL creates and manufactures vaccines and disease treatments. It is one of the world’s largest influenza vaccine providers and operates one of the biggest plasma collection networks |
BHP
The largest company on the ASX by market capitalisation, BHP is a commodities producer, mining iron ore, copper, nickel, potash, and metallurgical coal. It has mining assets across Australia and the Americas, with its business spread across more than 90 locations worldwide.
The company is focused on the resources the world needs to grow and decarbonise. These include nickel for electric vehicles and copper for renewable infrastructure.
In late 2022, BHP entered into a scheme of arrangement to purchase 100% of OZ Minerals Limited (ASX: OZL) for an enterprise value of $9.6 billion. Implementation of the scheme is subject to several approvals.
BHP reported record earnings before interest, tax, depreciation, and amortisation (EBITDA) of US$41 billion last financial year. The company says its portfolio is positively leveraged to megatrends, with a world-class resource base across a differentiated set of commodities.
Commonwealth Bank
Commonwealth Bank is a leading provider of integrated financial services. It provides retail, business, and institutional banking, superannuation, insurance, and share-broking products and services. The bank employs some 48,000 people and serves 15.9 million customers. In FY22, Commonwealth Bank reported net profit after tax (NPAT) of $9,673 million, up 9%.
The bank’s operating context changed significantly in 2022. The economy recovered strongly as people adjusted to living with COVID-19. Nonetheless, geopolitical tensions created uncertainty in financial markets and cost of living pressures have continued to rise. CBA has focused on strengthening customer relationships, which has resulted in further growth in core deposit and lending volumes to retail, business, and institutional customers.
CSL
CSL started out as Commonwealth Serum Laboratories in 1916. It was established to service the health needs of the nation, which was isolated by war at the time. Over the ensuing years, CSL provided Australians with access to medical advances, including penicillin and vaccines against influenza, polio, and other infectious diseases.
Today, CSL comprises four business arms:
- Behring, which focuses on rare and serious diseases
- Seqirus, one of the largest influenza vaccine providers in the world
- Plasma, which operates one of the world’s largest plasma collection networks
- Vifor, a leader in iron deficiency and nephrology.
In FY22, CSL delivered an NPAT of $2.255 billion, which was at the top end of its guidance. The influenza vaccines business delivered an exceptional performance, and there was significant growth in the volume of plasma collections. The company expects NPAT for FY23 to be in the range of $2.4 billion to $2.5 billion.
Pros of investing in large-cap shares
Consistency: Large-cap companies are well-established and financially stable. They tend to have extensive networks, which allow them to consistently provide their products and services throughout economic cycles.
Transparency: Large-cap companies have usually been in business for a long time. More data is available on their actions and financial activities than for newer or start-up companies. ASX-listed companies are required to report their financial results periodically. Investors can assess these reports via the ASX website1 or here at the Motley Fool2 to help them make investment decisions.
And the cons…
Expensive: Compared to small- or mid-cap stocks, large-cap shares can be relatively expensive. This is because large-cap shares are more discoverable and subject to higher demand.
Low capital appreciation: Large-cap stocks tend to respond more mildly to market fluctuations than mid- or small-cap stocks. This means large-cap share values don’t tend to rise as much as those of small- or mid-cap shares during a bull market.
Are ASX large-cap shares a good investment?
Whether ASX large-cap shares are a good investment for you will depend on your financial situation and investment goals. Large-cap shares can add stability to a diversified portfolio of ASX stocks and will likely pay dividends.
Prospective investors should always assess how large-cap stocks might fit within their portfolio, even those that are widely known. Large-cap stocks can be helpful in balancing out volatile growth stocks, as large-cap share prices tend to move slowly.
Before making an investment decision or doing any trading, make sure you understand the circumstances in which you should invest in Australian shares.
For investors who prefer not to pick individual shares, there is an exchange-traded fund (ETF) that provides exposure to the 50 biggest large-cap shares on the Australian share market – the SPDR S&P/ASX 50 (ASX: SFY).