The 3 Best Blue Chip Stocks to Buy Now
Investors are starting to wonder if we’ve seen the 2022 low or, at the very least, if the lows we hit last month will hold for the next few weeks. Either way, investors really should be looking for the best blue chip stocks to buy.
In fact, no matter what the market does, investors really should be looking to buy the stocks of high-quality companies with strong businesses.
Sometimes during euphoric markets, poor companies generate strong gains. But it is these same stocks that are decimated in bear markets.
At least the best blue chip stocks tend to hold up to some degree in the midst of bear markets. When these names are under pressure, they generally provide investors with good buying opportunities.
|JNJ||Johnson & Johnson||$164|
Johnson & Johnson (JNJ)
Why is it Johnson & Johnson (NYSE:JNJ) one of the best blue chip stocks to buy? The answer is that the company continues to deliver and the stock continues to show relative strength. Indeed, while the S&P500 is down 22.4% from its peak and 21.9% so far this year, JNJ stock is down only 10.3% and at the top 3.5% during these periods, respectively. So while it is also struggling, it outperforms the benchmark against which most investments are measured.
The company pays a dividend yield of 2.75% and last month its management announced a new $5 billion buyout plan and reaffirms its outlook for the full year. It’s talking the conversation and walk the walk.
Then, on October 18, Johnson & Johnson released third-quarter results that beat average analyst expectations for the top and bottom lines. Additionally, JNJ slightly improved its outlook for the full year. Trading at just 16 times earnings, JNJ stock is hard to ignore.
i really believe that Microsoft (NASDAQ:MSFT) is one of the best blue-chip stocks to buy, and I recently identified the “greedy price” at which investors should be looking to buy it if it ever falls that far.
The truth is, I would be surprised but happy if it reached that $210-$215 level. Shares remain around 30% below their all-time high and have recently fallen as low as 37.3%. For many, this is reason enough to buy this stock, even if its dividend yields only 1.1%.
Not all blue chip stocks pay a solid dividend, and that’s okay. Sometimes stocks are attractive because of the rigidity of corporate operations and the strength of their competitive advantages. Considering the number of industries that Microsoft dominates in the world, I think it has a very strong business and competitive advantages.
Additionally, analysts expect, on average, the company to generate double-digit percentage growth in earnings and revenue each year through FY26. In addition to strong growth, Microsoft is generating higher operating margins than all FAANG brands.
Trading at around 22x earnings, the stock is starting to look like a bargain given the quality of its earnings.
Cardinal Health (CAH)
I wanted to go with the obvious choice here – Apple (NASDAQ:AAPL) – but you don’t Google the best blue chip stocks to buy now to learn more about Apple. Instead, you want a new idea, something like Cardinal Health (NYSE:HAC).
With a market cap of $18.5 billion, Cardinal Health isn’t small, but it tends to go unnoticed. This is especially true when compared to the other two stocks on this list. That said, CAH is also the most successful of the three.
Stocks hit all-time highs in September and are now just 1.5% below those highs! That’s impressive, given the state of the overall market. Additionally, the stock is up 37% this year and 43% over the past 12 months.
Its dividend yield is approaching 3%, while the stock trades at a measly 13 times its earnings despite this year’s rally. Analysts’ average expectations are for revenue growth of around 9% this year and 6.5% next year. On the earnings front, average estimates call for only 4% growth this year but nearly 18% next year.
It’s a name to keep on your radar and buy on weakness as long as the trend remains favourable.
As of the date of publication, Bret Kenwell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.