Good Blue Chip Stocks To Buy Now
Hedging strategies by definition limit upside when stocks are rising, which helps explain the industry's years of underperformance during the last bull market. By the same token, however, hedging strategies limit downside when everything is selling off. And goodness knows investors have seen plenty of red on their screens recently.
good blue chip stocks to buy now
It turns out that much of what they were up to involved the large-scale dumping of the market's biggest and best-known blue chip stocks. "Funds played defense in 2022," notes Goldman Sachs strategist Ben Snider.
Big-name blue chip stocks also carry a lower level of reputational risk for professional money managers. (It's a lot easier to justify holding a large position in a Dow stock than a no-name small-cap if restive clients start grumbling about their returns.)
Have a look at hedge funds 21 top blue chip stock picks as of Dec. 30, 2022 in the chart below. Note that defense did indeed prevail in Q4. Only four names saw a positive net change in share ownership by hedge funds.
Hedging strategies by definition limit upside when stocks are rising, which helps explain the industry's years of underperformance during the bull market. By the same token, however, hedging strategies limit downside when everything is selling off. And goodness knows investors have seen plenty of red on their screens so far this year.
Indeed, components of the Dow Jones Industrial Average are heavily over-represented when it comes to hedge funds' favorite stock picks. Fully 13 of the Dow's 30 names rank among the stocks most widely held by hedge funds.
That's partly a function of Dow stocks' massive market capitalizations and attendant liquidity, which creates ample room for institutional investors to build or sell large positions. Big-name blue-chip stocks also carry a lower level of reputational risk for professional money managers. (It's a lot easier to justify holding a large position in a Dow stock than a no-name small-cap if restive clients start grumbling about their returns.)
Have a look at hedge funds' 25 top blue-chip stocks to buy now. All these names likely appeal to elite funds because of their size, strong track records or outsized growth prospects. But we'll delve into a few specifics that make each blue chip special.
Cisco Systems (CSCO (opens in new tab), $56.04) became slightly less popular with hedge funds in the fourth quarter, but the technology conglomerate still managed to crack the smart money's top 25 most widely held stocks.
Abbott Laboratories (ABT (opens in new tab), $122.41) leaped into the top 25 most popular hedge fund blue chips in Q4, perhaps in anticipation of the broader market's shift toward favoring value names in 2022.
Salesforce.com (CRM (opens in new tab), $208.09) was added to the Dow in 2020 when Exxon Mobil (XOM (opens in new tab)) was defenestrated from the blue-chip barometer. Being tapped for membership in the elite average made the software-as-a-service juggernaut more popular than ever with hedge funds.
It also doesn't hurt that BAC is one of Warren Buffett's favorite stocks. Berkshire Hathaway (BRK.B (opens in new tab)), the holding company of which Buffett is chairman and CEO, owns more than 1 billion shares. The stake accounts for 13.6% of Berkshire's equity portfolio, or its second-largest holding after Apple (AAPL (opens in new tab)).
But the Street remains mostly bullish on the blue-chip bank stock, giving it a consensus recommendation of Buy, with moderate conviction. Of the 26 analysts issuing opinions on BAC tracked by S&P Global Market Intelligence, 10 rate it at Strong Buy, six say Buy, eight have it at Hold and two call it a Strong Sell.
Not only is this Dow component the largest stock in its sector by market cap, but it's a classic defensive blue-chip name that historically trades with exceptionally low volatility relative to the broader market.
Yet another Dow component, pharma giant Merck (MRK (opens in new tab), $76.32) has the size and blue-chip prestige to be an obvious healthcare sector pick for any large institutional investor.
Dow component Home Depot (HD (opens in new tab), $316.65) has long been one of the most popular blue-chip stocks among hedge funds and other investors trying to gain exposure to housing stocks specifically, but also consumer spending in general.
Institutional investors looking to make big bets in the healthcare sector can't avoid the gravitational pull of Dow component UnitedHealth Group (UNH (opens in new tab), $475.75). With a market value of nearly $450 billion and a 2022 revenue estimate of more than $319 billion, this blue-chip stock is the largest publicly traded health insurer by a wide margin.
The long-term allure of NVDA is easy to understand. Few tech stocks offer so much exposure to so many emerging technologies and applications. NVDA's high-powered graphics processing units (GPUs) drive everything from PCs and video game consoles to artificial intelligence (AI), data servers, supercomputers, mobile chips and even cryptocurrency mining.
Whether we're talking hedge funds, mutual funds or other large piles of equity capital, Johnson & Johnson (JNJ (opens in new tab), $166.00) is among the must-have blue-chip stocks for any large-cap healthcare portfolio.
The bottom line is that the smart money still very much likes the sprawling money center bank. The Street, for its part, is somewhat less bullish. Although the pros give this blue chip a consensus recommendation of Buy, conviction is highly mixed.
Few blue-chip stocks get higher marks from analysts, hedge funds and even Warren Buffett than Visa (V (opens in new tab), $219.27). That's because the world's largest payments network has unique advantages in a world that's ditching cash in favor of digital transactions.
Nearly 36% of all hedge funds, or 653 in total, owned this blue-chip tech stock as of Dec. 31, up from 636 hedge funds in the third quarter. Of those hedge funds, almost 14%, or 250, counted GOOGL among their top 10 holdings, down from 253 in the previous quarter.
The online commerce giant has soared since the 2020 March lows as more and more people began doing their shopping exclusively on the internet. Like Microsoft, Amazon now boasts a market cap of more than $1.5 trillion and has become among the most successful companies in American history. Together with Facebook, Apple, Netflix and Google, these 5 companies make up the FAANG stocks that have provided massive gains to investors for the better part of the last decade.
Visa has met or beaten earnings expectations for 4 straight quarters and has seen both profit and revenue growth in each of the last 5 years. With a firm foothold in the payments processing industry, Visa will likely be a blue chip stock for many years to come.
The current year is likely to be challenging for equities with headwinds related to global growth. However, stock selection remains the key, and several growth and blue-chip stocks will outperform. While buying undervalued growth plays, I prefer to remain overweight on some of the best blue-chip shares.
Another interesting point to note is the Vanguard S&P 500 ETF (NYSEARCA:VOO) has delivered annualized returns of 12.52% in the last 10 years. During the same period, the Vanguard Growth ETF (NYSEARCA:VUG) has returned 12.8% in the past decade on an annual basis. The strong performance of blue-chip stocks is likely to sustain considering attractive valuations and a healthy dividend yield.
Chevron Corporation (NYSE:CVX) is among the best blue-chip stocks to buy for 2023. Besides the potential for capital gains, CVX stock also offers an attractive dividend yield of 3.1%.
Gold has witnessed a sharp rally in the recent past with inflation cooling on a relative basis. The precious metal trades above $1,900 per ounce, which has also sparked a rally among gold mining stocks. With recession fears in 2023 and the likelihood of the dollar weakening further, gold is an attractive investment theme.
Last year was challenging for technology stocks, with valuations adjusting on the downside. Some of the best blue-chip stocks from the technology space however seem to be trading at attractive valuations.
British American Tobacco (NYSE:BTI) is a significantly undervalued blue-chip stock that offers an attractive dividend yield of 5.6%. At a forward P/E ratio of 7.8 times, the stock seems poised for a meaningful rally in the coming quarters.
The term "blue chip stock" comes from the world of poker, where chips used in gambling have different colors to represent different dollar amounts. A blue chip is typically the one with the highest value of all, surpassing white chips and red chips.
A diversified portfolio might include the ownership of a rash of blue-chip stocks, meaning the stocks of large, well-capitalized, well-understood companies, among a variety of other holdings. In addition to owning individual stocks, investors may also seek to have blue-chip exposure through the purchase of mutual funds or exchange-traded funds (ETFs).
A market participant can buy blue chip stocks individually, or by buying mutual funds or exchange-traded funds (ETFs) that invest in blue-chip stocks. In some cases, funds and ETFs will hold a variety of stocks and asset classes, including blue chips. In other cases, the funds or ETFs might be focused exclusively on blue chips, such as an ETF that tracks the Dow Jones Industrial Average, which comprises 30 of the largest blue chip stocks.
The best companies can easily survive and thrive through the downturn. They have long histories of rewarding investors through both the thick and the thin. The blue chip companies below also pay dividends.
Blue-chip stocks are established, safe, dividend payers. They are often market leaders and tend to have a long history of paying rising dividends. Blue-chip stocks tend to remain profitable even during recessions. 041b061a72