7 Undervalued Blue-Chip Stocks to Buy Now

Most things in life are cyclical – understand what cycles might be driving your stocks and where they are in their lifecycle. On the flip side, investing in long-tailed themes that are closer to their beginning than their end can be a great investment strategy. Capitalism makes our lives better every day in the form of new products, increased conveniences, lower prices, and more. However, it can create headaches with our investments if we are not careful with our diligence process. Shocks such as the global recession of 2008 highlight the occasional vulnerability of even the “best” perceived companies (e.g. General Electric).

Additionally, blue-chips are very popular among dividend investors because these large enterprises can afford to share a substantial part of their profits with shareholders. Furthermore, they often increase their dividends on an annual basis and sometimes use excess cash to buy back shares. There are various reasons to invest in blue-chip stocks, with their stability being one of the most important. Blue chip dividend stocks can be some of the most appealing investment opportunities for income and capital appreciation. Idea is to highlight those companies which have the capabilities to pay consistent-dividends.

What stocks are considered blue chip?

Looking at current valuations, JPM stock might be positioned for another rally relatively soon. Freeport-McMoRan is also attractive with copper emerging as a key investment theme. Be it electric cars or renewable energy, the application of copper is likely to increase in the coming decade. The company seems well positioned to benefit from this tailwind. From a backlog growth perspective, Lockheed has seen significant growth in orders from outside the United States. With NATO allies still falling short of the defense spending target, it’s likely that order intake will remain strong.

Blue chip companies are already established; therefore, room for further growth is limited. While returns are guaranteed, they are lower than the other high-performance stocks. This pricing power also means these companies generate positive free cash flow which they can use to reward shareholders.

Reliable and steady cash flows allow these companies to offer investors a relatively high dividend yield. Blue-chip stocks are stocks issued by large, well-established companies that has a proven track record of financial success. In many cases, the companies in this category of stocks are household names that you are likely to be familiar with. Among more cautious investors, blue-chip stocks are FXCM Background popular because of their stable returns on investment over time. A Wall Street Journal article about blue chip dividend stocks in 2014 highlighted some of the challenges recently faced by these massive businesses. It notes that many of these companies were so successful that the large revenue base they built up made them too big to switch strategies quickly when market conditions changed.

Familiarity with a company makes stock buying more comfortable, and it’s exciting to become a partial owner of a business you know. Despite the Kodak and Sears examples, it’s important to note that blue chip stocks can be the bedrock of an investing portfolio. Some may still be in full-on growth mode while many others are very mature companies. Even those slower-growing names can be attractive long-term investments, in part because of the dividends those companies often pay . Some investors love buying blue chip stocks on the theory that the strength of the financial statements of the issuing companies means that their income is protected. Inexperienced investors often target investments that they think will make them rich quickly.

However, investors can disagree about what exactly makes a blue-chip company and which companies belong on the list. People usually talk about blue-chip companies in the context of choosing stock investments. Moreover, the S&P 500 Dividend Aristocrats is an index constituted by 25 blue-chips that have increased their dividends for at least 25 consecutive years. A few other indexes that have many blue-chip stocks in them are the S&P 500, the Nasdaq 100, the Russell 1000, the Euro Stoxx 50 and the Nikkei Stock Average .

Blue chips in a well-balanced portfolio

For this reason, many young and risk-hungry investors looking for high returns turn to small and medium-sized companies that can still grow substantially. Especially investors under 25 years of age tend to take on more risk, according to a Business Insider article. In this article, we’ll explore whether or not these familiar firms also make for good investments and we’ll guide you through the process of finding and evaluating blue-chip stocks. Dividend aristocrats are S&P 500 companies that have raised their dividends for 25+ years.

By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply. Enter your email address below to receive the latest headlines and analysts’ recommendations for your stocks with our free daily email newsletter. Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.

The other will contain its highly regarded pharmaceuticals and medical devices segment. Whether you’re buying blue-chip stocks or not, building a portfolio out of individual stocks takes time and research. As noted above, blue-chip stocks are generally, but not always, household names. Note What to Expect from This Review that this list does not include every blue-chip stock; it is just intended to be a sample. No one type of stock should make up the bulk of your portfolio. Diversification, as always, is key when investing, even if you’re investing in companies that are widely considered rock-solid.

• While there are hundreds of publicly-traded companies that most of us have never heard of, blue-chip stocks allow people to put their money in enterprises they know well.
• Like Qualcomm, we see this as driving the potential for 12%+ annual returns to shareholders as the valuation reflates over time.
• It’s also worth noting that the Americas, Europe and Greater China remain the revenue drivers in terms of regional breakdown.

There’s no official blue chip stocks list, but the Dow Jones Industrial Average, which lists 30 prominent companies, is a good place to start. These companies are often regarded as some of the country’s most valuable and reliable heavyweights. By investing in a diversified index, you have less risk that the individual blue chip stock you choose becomes the next Sears when you’re not paying attention. Because blue chip stocks are usually the most dominant names in their respective industries, there are a limited number of them.

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These stocks aren’t the most exciting investment, but they can be stable additions to a diversified portfolio. Because they’re typically less volatile than many other stocks, investors may buy blue-chip stocks to provide steady growth or income in their portfolios. These investments are especially popular among risk-averse investors or those nearing retirement because of their reliability. Active investors might prefer to choose individual stocks, requiring more research and time on the investor’s part. In contrast, passive investors often choose to invest in this category of stocks with blue-chip ETFs or mutual funds. Given that the largest market indexes are full of blue-chips, it’s relatively easy to find blue-chip funds.

Trillium Therapeutics for $2.26 billion, an acquisition that diversifies the company’s oncology pipeline. With strong cash flows expected in the coming quarters, Pfizer has financial flexibility for acquisition driven growth. Microsoft returned $10.9 billion to shareholders in Q through dividends and share repurchase. Considering the cash flows and the balance sheet health, aggressive repurchasing should continue. Coca-Cola has a market cap of over $200 billion and offers a 2.97% dividend yield.

Blue-chip stocks are often large-cap stocks, which typically means they have a market valuation of $10 billion or more. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Blue chip stocks are seen as safer investments than other stocks because of their long histories. However, Facebook didn’t even exist until 2004, so it is not well-established enough to be a blue chip company.

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Pharmaceutical revenues were higher by 5.1% during the quarter. Specialty Care remains especially impressive, with 19.9% revenue growth. Click here to instantly download your free spreadsheet of all Blue Chip Stocks now, along with important investing metrics. While returns are guaranteed, they are lower than other high-performance stocks. StockholdersA stockholder is a person, company, or institution who owns one or more shares of a company.

We can also refer to a list of the highest market capitalization stocks and treat them as blue chips. Additionally, most blue-chip companies have strong cash flows. Blue-chip stocks might not provide multi-fold returns in quick time. However, there is constant shareholder value creation through dividends and share repurchase.

With more cash on their balance sheets and not as much debt relative to their earnings power, fiscally strong companies can buy back more stock at lower valuations. I believe that banking stocks are also likely to be among the outperformers in 2022. JPM stock is attractively valued at a forward P/E of 11.3x and offers an annualized dividend of $4 per share to boot. With renewed global economic growth and accelerating inflation, I would also be remiss not to include a commodity stock in my list of blue-chip stocks. FCX stock has trended higher by more than 80% in the last 12-months. However, at a forward P/E of 14x, the stock looks attractive for further upside.

Blue chip shares are a safe option—they can survive tough market cycles. First, investors should consider the benefit of diversification. Blue chip stocks are a way for growth investors to add a value component. But diversification also means broadening your sector exposure. One way to do this is to find mutual funds and exchange traded funds that specialize in blue chip stocks. Consistent performance, solid balance sheets, and the opportunity to collect dividends should be enough to convince you that blue chip stocks have a place in your portfolio.

So a comparatively slower but reasonable future growth is something which they can deliver. It’s also worth noting that the first rate-hike after the pandemic is likely to occur in 2022. As economic activity trends towards potential GDP, the banking sector is likely to benefit with growth in the core banking business.

Finally, we’ll go over some of the downsides of investing in blue chips. Companies with a market cap of over $200 billion are typically considered blue chip stocks companies. They are the most stable, profitable, and enduring companies, which generally makes them among the safest investments and, like a blue chip in poker, highly valuable to investors. TradeAllCrypto: Crypto Broker Review Blue chips are generally considered the best-known, most established, and best-capitalized companies in the world. The total number of blue chip stocks depends on the criteria used to define a blue chip stock. Ideally, investment portfolios should include diverse components—bonds, cash, blue chip securities, mid-caps, and small caps.