As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities. It’s also important to know that hedging strategies by definition limit upside when stocks are rising. That helps Blue chip stock list explain the industry’s tendency to underperform in a bull market. An in-depth look at up-and-coming company stocks in the U.S. stock market this year. Procter & Gamble makes essential household products, things like shampoo, razors, toothpaste, diapers and toilet paper.
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By spreading out your investments and taking a long-term perspective, you can minimize risk and position your portfolio for growth. Companies like PepsiCo (PEP 0.34%) may not set the world ablaze with growth, but slow-and-steady expansion has fueled durable investment returns for decades. PepsiCo sells its namesake soda but, in reality, is a conglomerate of food and beverage brands, including Mountain Dew, Gatorade, Quaker, Frito Lay, Doritos, Cheetos, and many more. You’ll find PepsiCo’s products throughout grocery stores worldwide, which makes it hard for the company to have a down year. Diversifying its product portfolio and ongoing innovation efforts are pivotal for J&J’s growth in the competitive healthcare sector. Monitoring regulatory approvals, new product launches and the company’s responses to legal challenges are essential aspects for investors evaluating its performance and future outlook.
- These companies have strong brand names and reputations, and they generate dependable earnings.
- Analyst Cathy Seifert notes that Buffett may be preparing for an economic downturn, and with $277 billion in cash, Berkshire is positioned to weather this storm and capitalize on potential opportunities.
- As usual, hedge funds were heavily invested in most of the market’s biggest and bluest of blue chip stocks – particularly Dow Jones stocks.
- But for the investor who gets nervous about the ups and downs of the market, that’s a great trade-off.
Advantages of Blue Chip Stocks
Investors seeking a balance of lower risk and steady returns should look at blue chip stocks that pay dividends. Let’s take a closer look at these stocks that offer the best of both worlds. They’re stalwart companies that meet the blue chip standard and pay a strong dividend to deliver the best returns. They don’t offer the meteoric growth of a hot startup or today’s most popular cryptocurrency, but instead give your portfolio steady returns over periods of time measured in decades.
What Are Blue Chip Stocks? Should I Invest in Them?
Index funds and ETFs track an index, which is a specific segment of the stock market. Since blue-chip stocks typically have large market caps, a large-cap index fund or ETF is a good way to get exposure to these companies. You can also buy a fund that tracks the S&P 500 or the Dow Jones Industrial Average since both include blue-chip stocks. Since there is no hard and fast definition of blue-chip stocks, we filtered for stocks featured on the S&P 500, NASDAQ 100 or Dow Jones Industrial Average indexes with a market cap of $200 billion or more. We made sure those stocks offered a dividend and have been a public company for more than 20 years. While there is no formal definition of a blue-chip stock, these companies are known for being valuable, stable and established.
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Additionally, the S&P 500 Dividend Aristocrats includes 25 blue-chips with a record of increasing dividends for at least 25 consecutive years. Other indexes with numerous blue-chip stocks include the S&P 500, Nasdaq 100, Russell 1000, Euro Stoxx 50 (Europe), and Nikkei Stock Average (Japan). Companies with a small market cap tend to be quite volatile investments since they are relatively illiquid. Blue-chips, on the other hand, are very liquid and investors can easily buy or sell large numbers of shares without influencing the share price.
Roche stock trades 29% below our fair value estimate of $55 per share. The company’s drug portfolio and industry-leading diagnostics provide significant competitive advantages and underpin our wide economic moat rating, says Morningstar strategist Karen Andersen. “This Swiss healthcare giant is in a unique position to guide healthcare into a safer, more personalized, and more cost-effective endeavor,” she notes. With its biologics focus and innovative pipeline, we expect Roche to continue to achieve growth as its blockbusters face competition. Nike is the most undervalued company on our list of the best blue-chip stocks to buy.
Microsoft (MSFT) is a global technology giant recognized for its software products, services and hardware. The company is known for its Windows operating system, Office suite, Azure cloud services and hardware devices like the Surface lineup. Microsoft has a vast portfolio covering business software, gaming (Xbox), artificial intelligence (AI) and productivity solutions.
It’s important to note that Berkshire Hathaway is the only blue chip stock on this list that doesn’t pay a dividend. CEO Warren Buffett has one of the most impressive track records of market-beating returns in history and prefers investing the company’s cash to paying dividends. Apple’s gradual growth, paired with its increasing dividend payout, is an attractive combination. The stock’s dividend yield may be somewhat low, but the company’s dividend payout comprises less than 20% of Apple’s cash flows, meaning that continued dividend growth is likely. Apple has been raising its dividend every year since it was instituted in 2013. When looking for blue chip stocks that dole out regular and rising income, Apple is a top choice.
Apple, Berkshire Hathaway, Coca-Cola, Johnson & Johnson, and American Express are all blue chip stocks with operations primarily based in the United States. However, just about every investor can benefit from having a portion of their portfolio invested in blue chip stocks. It doesn’t have to be a set percentage; investors will have varying viewpoints about how much risk they want to assume.
There are, however, a few downsides investors have to keep in mind before buying blue-chips. A common reason not to invest in blue-chips is the fear of missing out on exceptional returns. Furthermore, blue-chips, like any other investment, are not a guarantee. There are many examples of blue-chip companies that failed and cost investors a lot of money.
Despite this, over a long-term horizon, Goldman Sachs has performed strongly, generating a strong average return over the past decade. However, KO’s average return over the past decade is the worst on this list. Looking forward, the company is trading at a P/E ratio that is toward the top of its five-year range, meaning it does not stand out from a valuation perspective. Its P/E ratio doubled from July 2022 to April 2023, and at that time was the highest on our list.
Although investing in a blue chip stock can bring steady, long-term returns — they are well regulated and have potential for regular dividends — there are some cautions to keep in mind. Investing in blue chip stocks is often seen as a safer investment strategy, particularly suitable for conservative, long-term investors. These stocks offer the potential for steady growth and are less volatile during market downturns. https://investmentsanalysis.info/ Additionally, they often provide regular dividends, which can be attractive to income-seeking investors. Blue chip stocks are shares of large, nationally recognized companies known for their financial stability, reliable growth, and consistent dividends. These stocks represent industry-leading firms with a long history of performance, making them a favored choice for investors seeking lower risk and steady returns.