Size does matter: Five stocks that prove it

One of the bigger debates in business is whether or not size is an advantage. There is really no clear-cut answer, and there are valid arguments to be made for small, agile operations, and for organizations of tremendous scale. I believe that size really does give companies an upper hand on their competitors, particularly in certain industries.

The biggest argument against size mattering is that growth, not size, is the most important part of any business. As companies mature and become really large, there is less room for them to grow. This argument makes total sense, and is the reason why a company such as McDonald's (MCD) may be less attractive today than it was 15 years ago when the fast food chain did not have locations covering the entire map.

Since McDonald's is so large, and there are so many locations, the company is forced to look overseas to China and other emerging markets for growth. It is not the most desirable situation for a company to find itself in, and a is primary reason why some people would argue that size can work against a company.

On the other side of the coin, McDonald's does benefit from its size in terms of pricing power. The company is so big that it is able to get its ingredients at low prices, leading to better margins than smaller competitors.

I believe that where size really matters is in industries or sectors that have high barriers to entry. In these cases, the addition of new competitors in the future is limited, so the current industry leaders find themselves in a great position to maintain that dominance down the road.

Let's look at a couple of stocks that I believe do indeed prove that size matters.

Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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