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How many gates can the barbarians break down? Private equity funds and activist investors have been known as barbarians ever since Barbarians at the Gate, the novelistic account of the epic buy-out of RJR Nabisco in 1988.

Rather than staying outside the gates, they have now conquered small and medium- sized stocks and are moving on to large-caps. Stocks under pressure from activists include Alliance Boots in the UK, Carrefour of France, and DaimlerChrysler of Germany. Numerous large companies are going private in the US. Only the giant “mega-cap” companies can repulse the barbarians. This is bad news for their shareholders, as this has shown up in poor price performance.

The effect is dramatic. The Russell Global Small Cap Index gained 5.1 per cent in the first quarter (6.9 per cent outside the US), while the equivalent large-cap index rose only 2.6 per cent. But the Russell Top 50, covering the largest US companies, is actually down 1.8 per cent for the year.

Mega-caps have shown up on value investors’ screens for a while and with reason. The Russell Top 50 trades on a price/earnings multiple of 15, while the Russell 2000 index of small US companies is at a multiple of 40. But mega-cap share prices continue to lag. Jonathan Stubbs of Citigroup looks at the performance of the 10 largest stocks in the world’s biggest indices. In the FTSE 100, and Europe’s DJ-Stoxx 200, these stocks have underperformed their indices by about 10 per cent over the past six months. In the S&P 500 and the Nikkei 225, they have underperformed by 6 per cent.

There are other reasons for this. Conglomerates are out of favour and large companies tend to be proxies for global growth, which is unconvincing. But in a market being driven by liquidity, the biggest stocks may be doing badly precisely because they are too big for even the biggest amounts of cash to take over. No-one is going to take General Electric private.

Deals are getting bigger, as the barbarians set their sites on ever larger targets. But while the mega-caps remain beyond their reach, they seem fated to underperform, even though they look like good value.

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