Best-in-Breed Blue Chips

I think it’s safe to say that blue chip investors who followed a targeted large-cap strategy based on measured fundamentals, like earnings and growth, found 2010 to be quite profitable in their best stock picks. So what can we expect from blue chips in 2011? In short, we can expect more good things — if you pick the right blue chip stocks to buy.

And my top five blue chips for January are starting the new year off right by pulling ahead of the rest of the pack.

#1 Baidu

After a little profit-taking in December, shares of dominant Chinese Internet search engine Baidu Inc. (NASDAQ: BIDU) are back on the rise. With a new wave Chinese IPOs hitting the market in the new year, Baidu is certain to benefit. As more companies are fighting for recognition on the market, advertising will be key. And Baidu offers a great advertising platform that reaches hundreds of millions of users.

The company booked triple-digit EPS gains in the past three quarters and is expected to make similarly spectacular gains in the fourth quarter. And 2010 marked Baidu’s sixth straight year of full-year profit gain. The stock will surely continue its superstar status in 2011.

Buy BIDU below $111.

#2 F5 Networks

F5 Networks Inc. (NASDAQ: FFIV) gave a spectacular performance in 2010, having pulled in 34% in gains since I first recommended it to Blue Chip Growth subscribers in October. Despite the bumpy ride, technology stocks had in the later part of 2010, F5 Networks remains one of the top picks for the ever-increasing cloud computing market.

In 2010, the stock’s value more than tripled. With a variety of new products and partnerships with big-name companies, such as Citrix Systems, Inc. (NASDAQ: CTXS), VMWare, Inc. (NYSE: VMW) and Microsoft Corporation (NASDAQ: MSFT), I feel confident that F5 will continue leading the way as the top data development and business telecommunications company on the market.

Buy FFIV below $149.

#3 Magna International

Canadian auto part maker Magna International Inc. (NYSE: MGA) is a global supplier of automotive systems, components and modules. The company is a survivor, seeing as several of its competitors have been dragged down by the bankruptcies of automotive giants GM and Chrysler.

While the stock has run up since the beginning of this year, I think it is still flying under the radar of many investors. But with an increasing dividend and share repurchase program, growing sales orders and rising EPS estimates, it will most certainly be gaining more attention in 2011. I look for it to continue to blast away analyst estimates in the coming months.

Buy MGA on a pullback below $55.

#4 Novo Nordisk

Novo Nordisk A/S (NYSE: NVO) continues to be one of the strongest bets in the all-too-often uncertain pharmaceutical market. As many of its major competitors continue to suffer and scramble to get new products approved for sale, Novo Nordisk’s performance and fundamentals remain strong.

In the past year, the company came out as our top healthcare stock. Novo Nordisk earned a strong 37% for 2010. I suspect the same will be true of the stock in 2011.

Buy NVO below $117.

#5 O’Reilly Automotive

O’Reilly Automotive Inc. (NASDAQ: ORLY) is one of the largest specialty retailers for aftermarket parts, automotive tools and professional service equipment in the United States. The company has more than 3,400 locations throughout 38 states as well as a lucrative online store.

O’Reilly has set itself apart from other specialty automotive retailers, providing a unique combination of do-it-yourself and commercial-grade products. The stock has sold off in the past month, but with plenty of gas left, I expect it to rev up in 2011.

Buy ORLY below $67.