Investing
Farran Powell
Farran Powell
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Updated 9:00 a.m. UTC March 8, 2024
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During economic uncertainty, one of the best ways to protect your portfolio is to load up on blue-chip stocks. Blue-chip companies are large companies with valuable brands, industry-leading businesses, and long track records of stability and profitability.
The best blue-chip stocks also have attractive valuations based on fundamental metrics, such as price-to-earnings ratio, price-to-book ratio and dividend yield.
We selected the best blue-chip stocks of 2024 based on the following factors: significant upside potential, strong net income balance sheets and bullish “buy” ratings from Wall Street analysts.
Best blue-chip stocks
- UnitedHealth Group (UNH).
- Nvidia Corp. (NVDA).
- .
- Salesforce (CRM).
- Caterpillar (CAT).
UnitedHealth Group (UNH)
Market cap
YTD performance
What you should know
UnitedHealth Group is a health care and insurance company based in Minnetonka, Minnesota. UnitedHealthcare is the company’s insurance division, while Optum is its health care division. The company’s origins date back to 1974 with the founding of Charter Med. Since then, UNH has grown to become the largest health care company in the U.S. by revenue, landing No. 5 on the Fortune 500 list.
In the second quarter of 2023, UNH brought in nearly $93 billion in revenue, which was up 16% year over year. Its net profit margin was 6%, with an impressive $6 earnings per share. UHC’s operating income was also up 13% year over year to $8 billion last quarter. It also has a strong cash flow. However, the stock is expensive by some metrics, such as price-to-book and price-to-earnings ratios.
Pros and cons
Pros
- Acquired LHC Group, a hospice and home health care provider, to help care for the aging population in the U.S.
- Most of its financials, including operating income and cash on hand, are improving year over year.
- Shares earn a modest dividend.
Cons
- Slightly expensive by some measures, such as P/E and price-to-book.
- The profit margin is a slim 6%, which is down nearly 7% year over year.
- Ongoing questions about health care costs could threaten its bottom line.
More details
Nvidia Corp. (NVDA)
Market cap
What you should know
Nvidia is a technology company that designs graphics processing units (GPUs) for data science and high-performance computing. GPUs, which were originally intended to accelerate the rendering of graphics in games, are also capable in other ways. For instance, they can be used for cryptocurrency mining and powering deep learning algorithms. These applications of Nvidia’s technology have made it a dominant player in the artificial intelligence industry and have helped the company grow in recent years.
Nvidia’s financials reflect its recent dominance. Its net profit for the second quarter of 2023 was nearly 46%, up 368% year over year. Its operating income was up $6.8 billion, or more than 1,200% year over year. It also increased its cash on hand by $803 million, which was up 192% year over year. In the last two quarters, it beat its revenue and EPS projections by 10% or more. However, Nvidia’s P/E ratio of 62.97 is high, even for a tech company. Its cash flow and earnings yield are also lower than the competition.
Pros and cons
Pros
- Nvidia has established a dominant position as a supplier of hardware that powers deep learning algorithms.
- Sizable profit margins.
- Large price appreciation in the past five years.
Cons
- High P/E ratio and very high price per cash flow.
- Low earnings yield and cash flow.
- Nvidia faces competition from Microsoft, Apple, Tesla and other tech giants.
More details
JPMorgan Chase & Co. (JPM)
Market cap
YTD performance
What you should know
JPMorgan Chase is one of the largest global financial services companies, with roughly $3 trillion in assets under management.
JPMorgan may be the biggest winner of the 2023 banking crisis. In early May, JPMorgan won an auction to acquire $92 billion in deposits, $173 billion in loans and $30 billion in securities from First Republic, which regulators had seized following a massive wave of customer withdrawals. JPMorgan paid the Federal Deposit Insurance Corp. about $10.6 billion for the assets.
Not only does the First Republic deal provide opportunities for earnings and revenue growth, but it is also a clear sign to investors that JPMorgan’s management wasn’t concerned about the bank’s liquidity or balance sheet during the height of the banking crisis.
Pros and cons
Pros
- No major problems with balance sheets, regulatory concerns or deposit runs.
- Investing heavily in organic growth opportunities and distribution platforms.
- Rigorously stress-tested annually by the Federal Reserve as a Category I bank.
Cons
- Net interest income could be at risk if the U.S. economy dips into a recession.
- Organic growth investments are not guaranteed to pay off.
- The First Republic acquisition further complicates an already complex global banking business.
More details
Salesforce (CRM)
Market cap
YTD performance
What you should know
Salesforce is the largest provider of customer relationship management software and operates a cloud-based Software-as-a-Service (SaaS) model. Salesforce’s CRM software includes data visualization, automation, analytics, marketing, enterprise communication and e-commerce tools.
In fiscal year 2023, Salesforce reported 18% revenue growth and a record $7.1 billion operating cash flow, up 19% year over year. Salesforce recently announced a restructuring plan to improve operating margins over the next two years, a program that could potentially kick Salesforce’s profitability and stock price to the next level. Salesforce is also doubling down on its share repurchase program increasing it to $20 billion, according to the company’s March announcement.
While Salesforce’s spectacular growth finally seems to be slowing, its pivot to gross margin expansion should maintain impressive earnings growth for years to come.
Pros and cons
Pros
- Leading market share in sales management automation, a market that has significant long-term growth potential.
- Several noncore growth opportunities, including customer service, e-commerce and marketing automation.
- Focus on margin expansion and profitability could accelerate earnings growth even as sales growth slows.
Cons
- Increasing competition from Oracle, Microsoft and other tech companies.
- Integration and execution risks associated with past and future acquisitions, including its deal for Slack.
- Shifting in focus to profitability may suggest the company anticipates further revenue growth slowdowns in coming years.
More details
Caterpillar (CAT)
Market cap
YTD performance
What you should know
The Irving, Texas-based company is well-known for manufacturing and selling diesel-electric locomotives as well as turning out construction and mining equipment. CAT serves several areas of the economy: construction, infrastructure, oil and gas and transportation. Media pundits often follow CAT stock as an economic barometer since it touches so many fields related to growth.
In the most recent quarter, CAT reported double-digit revenue growth, up more than 21% year over year. To seal the deal, earnings per share was up a whopping 75% in June 2023.
Pros and cons
Pros
- Double-digit forecasts for earnings growth.
- Positive year-over-year revenue growth.
- Sizable profit margin.
Cons
- Cash from investing was down by 109% in June 2023.
- Stock recently underperformed compared to competitor Deere & Co.
- CAT recently sold a significant stake in the company.
More details
Compare the best blue-chip companies
Methodology
The best blue-chip stocks included above all trade on a major U.S. stock exchange and meet the following criteria:
- Member of the S&P 500 index. The S&P 500 index is often used as a broad view of the U.S.’s economic health. The famed benchmark includes many large-cap companies, which tend to be less volatile.
- Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
- Positive net income in at least four of the past five years. Blue-chip stocks are consistently profitable, which is a reflection of their proven business models. Screening for profitability in at least four of the past five years doesn’t penalize companies that were temporarily unprofitable during the COVID-19 economic shutdowns in 2020.
- Market capitalization of at least $100 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a market cap of greater than $10 billion. For this list, all capitalizations are greater than $100 billion, as blue-chip companies hold large market capitalizations. Small- and mid-cap stocks are not typically considered blue-chip stocks.
Why other stocks didn’t make the cut
The best blue-chip stocks demonstrate consistent profitability and steady or growing revenue. They also have an attractive valuation based on fundamental metrics such as P/E ratio, P/B ratio and dividend yield.
Even though a stock is large or is an industry leader, it may be a better investment. A large company can have an eroding business model. General Electric (GE) was the most valuable company in the S&P 500 in 2005. But mismanagement and restructuring missteps made it a horrible investment years later. So even though many well-seated large-capitalization stocks may have a prior history of strong earnings, it’s important to look carefully at the current business model and future income generation.
Final verdict
Blue-chip stocks offer a good way to start investing since these are relatively low-risk investments. In this volatile stock market environment, focusing on high-quality stocks trading at reasonable valuations is prudent.
"Investors should be maintaining discipline if their portfolio is properly aligned with their goals and objectives," says David Bahnsen, chief investment officer at The Bahnsen Group.
A solid blue-chip stock generally ticks these boxes, since they typically hold a strong reputation and a long history of delivering returns.
Nvidia is among the best blue-chip stocks on this list but isn’t part of the Dow Jones Industrial Average (DJIA). However, Nvidia is among the top 20 companies with the largest market caps in the U.S.
The other blue-chip stocks listed — JPMorgan Chase & Co., Salesforce, Caterpillar and UnitedHealth Group — are among the 30 companies that make up the DJIA. They are also large in market capitalization, ranking within the top 85 companies in terms of size with more than $140 billion in market cap.
Frequently asked questions (FAQs)
The 30 stocks included in the DJIA are all considered to be blue-chip stocks. These include:
- American Express (AXP)
- Amgen (AMGN)
- Apple (AAPL)
- Boeing Co. (BA)
- Caterpillar (CAT)
- Cisco Systems (CSCO)
- Chevron (CVX)
- Goldman Sachs (GS)
- Home Depot (HD)
- Honeywell International (HON)
- International Business Machines (IBM)
- Intel (INTC)
- Johnson & Johnson (JNJ)
- Coca-Cola Co. (KO)
- JPMorgan Chase & Co. (JPM)
- McDonald’s (MCD)
- 3M Co. (MMM)
- Merck & Co (MRK)
- Microsoft (MSFT)
- Nike (NIKE)
- Procter & Gamble Co. (PG)
- Travelers Companies (TRV)
- UnitedHealth Group (UNH)
- Salesforce (CRM)
- Verizon Communications (VZ)
- Visa (V)
- Walgreens Boots Alliance (WBA)
- Walmart (WMT)
- Walt Disney Co. (DIS)
- Dow (DOW)
But there are plenty of other blue-chip stocks as well. Companies like Alphabet (GOOGL), Amazon.com (AMZN) and Nvidia (NVDA) would generally be considered blue-chip stocks, but are not included in the DJIA.
Dividend yields vary by company, but energy stocks, telecommunications stocks and real estate investment trusts often have some of the highest dividend yields in the market. Blue-chip stocks with high dividend yields include Walgreens Boots Alliance (WBA) and 3M (MMM), which both deliver more than a 5% yield.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
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Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi
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Farran Powell is the lead editor of investing at USA TODAY Blueprint. She was previously the assistant managing editor of investing at U.S. News and World Report. Her work has appeared in numerous publications including TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo! Finance, MSN Money and the New York Daily News. She holds a BSc from the London School of Economics and an MA from the University of Texas at Austin. You can follow her on Twitter at @farranpowell.
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