3 Large-Cap Stocks for May

By Jason Hall, Brian Stoffel, and Brian Feroldi Markets Fool.com

The stock markets continue to do incredibly well, with one of the biggest reasons being the incredible gains of many large-cap stocks in recent years. However, many are arguably overvalued now, and barring major tax reform, infrastructure spending, or other actions investors are hoping for, they may not deliver the same market-beating results going forward.

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But don't fret. Our contributors have identified three large-cap stocks that are worth a close look: pharmacy and healthcare companyCVS Health Corp(NYSE: CVS), tech giant andGoogle parentAlphabet Inc(NASDAQ: GOOGL) (NASDAQ: GOOGL), and one of the world's biggest electronic payments companies,Mastercard Inc(NYSE: MA).

Image source: Getty Images.

Keep reading to learn what makes these three large-cap stocks worth buying now.

A bargain in plain sight

Brian Feroldi(CVS Health):It hasn't been any fun to hold shares of CVS Health lately. The company's stock has been on the downtrend over the last two years after news broke thatWalgreens Boots Alliance managed to steal two major PBM customers, Tricare and Prime Therapeutics.The transition is expected to reduce CVS Health's prescription volume by 40 million in 2017 alone. As a result, CVS Health's EPS is expected to be flat.

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Given the loss of business and flat earnings, it is understandable why some shareholders have thrown in the towel. However, I think it's providing investors who can take a long-term view with a great opportunity to get in. Millions of baby boomers are set to retire over the next decade. Since old age and prescription usage are highly correlated, I'm confident that CVS' volume will return over time. In addition, the company has a handful of other growth drivers in place -- MinuteClinic, long-term care centers, specialty drugs -- that provide other outlets for profit growth.

Image source: Getty Images.

While investors wait for the company's growth trajectory to return, they get to enjoy a growing dividend that currently yields 2.5%. In addition, the company is plowing billions into share buybacks, which is having a meaningful impact on reducing the company's share count. That should help to turbo-charge profit growth down the road.

Despite all of these positives, shares are only trading for about 13 times next year's profit estimates. That's an attractive valuation for a dominant large-cap stock in today's overheated market.

Search, data, and advertisements galore

Brian Stoffel(Alphabet): It might not be the sexiest pick given its ubiquity, but I think investors would do themselves a favor to buy shares of Alphabet. The company recently announced earnings that once again proved that the move toward mobile advertising is only gaining steam.

While the aggregate cost-per-click continues to fall -- down 19% year over year -- that's simply the reality of mobile advertising. The ads are small and advertisers aren't willing to pay as much. But that doesn't matter, because the sheer volume of ads on mobile devices is astounding: For the entire ecosystem, Google's total aggregate paid clicks jumped an astounding 44%.

Image source: Getty Images.

I could go on and on about all the moving parts at the company, but the bottom line is this: Alphabet has more data than any company the earth has ever known. It uses that information to offer targeted ads. The world is moving toward mobile digital ads and Alphabet is capturing a huge swath of that transition. An investment in the company is an investment in that trend.

Over the last 12 months, that trend has generated almost $28 billion in free cash flow for Alphabet. Shares trade for 23 times that figure, which I think is a very fair price in today's market.

A growth industry you didn't realize was a growth industry

JasonHall(Mastercard Inc): In developed economies like the U.S. and Europe, electronic payments are just a part of everyday life. But in much of the world, people still use cash to pay for almost everything.But that has already started to change.

For instance, Mastercard reported 2% growth in gross dollar volume (dollars in transactions on its network) last quarter, but saw the same metric increase 6% in the rest of the world. Adjusted for the effect of currency exchange differences, Mastercard saw 11% growth in this important measure, with growth in both credit and debit transactions.

As a result, this international growth helped the payments network operator increase revenue 12% and earnings per share 16%.

Image source: Mastercard.

Most importantly, there's likely to be many years of growth ahead for Mastercard. The global middle class is going to double in size in coming decades, adding billions of new consumers, many of whom will embrace digital technology and prefer electronic payments.

This will bring more competition for Mastercard, but with operations in over 200 countries, relationships with hundreds of thousands of merchants and financial institutions around the world, and a reputation for having a safe, secure network, Mastercard is in an enviable position to be a big part of the future of electronic payments around the world. Mastercard may not be cheap, trading for 20 times last year's earnings and 34 times free cash flow, but it's worth the premium to own such a high-quality business.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Alphabet (A shares), Alphabet (C shares), and Mastercard. Brian Stoffel owns shares of Alphabet (A shares) and Alphabet (C shares). Jason Hall owns shares of Alphabet (A shares) and Mastercard. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Mastercard. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.