'Mega-Caps' Becoming More Attractive to Investors

Investors have been advised to play it safe in these tough financial conditions - and go into the "mega caps".

Previously, some analysts have advised people against putting money into blue chip firms with very large market capitalisations because their share prices tend to be more static than other firms. However, with the onset of the credit crunch these big shares are becoming much more attractive as a comparatively risk-free option, the Daily Telegraph reports.

A recent report from HSBC predicted this trend, and said that the ten biggest firms based in the UK - including BP, Barclays, Vodafone and HBOS - are set to benefit in particular from it. Collectively, these ten companies account for 40 percent of the value of FTSE 100: a stock exchange made up of Britain's 100 largest publicly listed companies.

Commenting, Robert Parkes, an equities strategist at the bank, said: "We continue to prefer the large-caps over the mid and small caps. Since the start of 2007 the large caps have outperformed the mid and small caps by 17 percent and 31 percent respectively.

"True, this out performance has reduced the relative valuation attraction of the blue-chips to some degree, but they still trade on a discount to [mid-sized firms]."

Over the past 12 months, the FTSE 100 has dropped by 18.5 percent. By contrast, the broader FTSE 250, which includes "mid-cap" firms, has fallen by 28 percent - showing that smaller organisations have been hit harder by the crunch.