Believe it or not, many blue-chip stocks stop receiving the attention that they often deserve. In many cases, these high-quality businesses haven’t changed or have actually improved. Despite that, the stock prices languish or decline as investors’ attention shifts to other industries or sectors.
Sometimes it’s penny stocks, meme stocks, cryptocurrencies or something else entirely that’s caused a bulk of investors from paying attention to the true leaders.
Other times it’s simply a case of other sectors have better momentum. As a result, investors free up cash in some of their holdings — high quality or not — and plow them into other funds and stocks looking to generate a better return.
The market can zig, then it can zag, and while these periods can create some discomfort and annoyance among investors, it also creates opportunities. That being said, let’s look at seven seemingly overlooked blue-chip stocks that are right in front of our faces.
- Apple (NASDAQ:AAPL)
- Amazon (NASDAQ:AMZN)
- Disney (NYSE:DIS)
- Caterpillar (NYSE:CAT)
- Visa (NYSE:V)
- FedEx (NYSE:FDX) or United Postal Service (NYSE:UPS)
- Realty Income (NYSE:O)
Now, let’s dive in and take a closer look at each one.
Blue-Chip Stocks to Buy: Apple (AAPL)
Apple is just a hair off its all-time high and sports a $2.5 trillion market capitalization. So how in the world is this some run-of-the-mill stock that’s flying under the radar?
Well, it’s not necessarily flying under the radar, but I don’t think it’s getting the credit that it deserves. The stock is just 12% above the 2020 high. After reporting earnings in January and April — despite blowout results — the stock failed to gain any meaningful traction.
Even after the most recent quarter, Apple stock is essentially flat.
The company has obliterated expectations in the last five earnings reports, as revenue came in about $37 billion ahead of estimates (collectively over that span). Given those results, I feel that Apple should be trading even higher.
It’s obviously built a fortress of brand recognition and its products continue to dominate when it comes to market share. Apple’s Services business started off small and as investors continue to criticize what may “move the needle” at a company this large, this unit has proved its strength.
In the most recent quarter, Services generated a new record $17.5 billion in sales. That was up about 33% year over year and brought its past nine months of revenue north of $50 billion. Services makes up just over 20% of total revenue, although its margins are twice as good as Apple’s Product division.
I’m not trying to ruffle any feathers here by calling both Apple and Amazon — two of the four largest companies in the U.S. — under-the-radar stocks. However, the fact of the matter is simple: It seems like investors have given up on many of the larger FAANG names.
While Apple has slowly but surely chugged to new highs, Amazon has not had the same traction. Due to a rare revenue miss and less-than-stellar outlook, the stock tumbled lower after reporting earnings in late July.
Shares of Amazon are now flat over the past year, despite an incredible year of business. E-commerce continues to accelerate, while its advertising, cloud and entertainment units all continue to hum along.
Call me crazy, but despite its $1.75 trillion market cap, I think too many investors have given up on Amazon. Analysts still expect 23% revenue growth this year and almost 20% growth in 2022. Earnings estimates sit north of 20% for both years too. Eventually, the stock will react to those numbers over time and as a result, Amazon will be an excellent buy-and-hold candidate.
Blue-Chip Stocks to Buy: Disney (DIS)
At this point, it’s starting to feel like investors are overlooking Disney, another one of our blue-chip stocks. Disney has been around for decades and continues to dominate the entertainment realm.
Its moves over the last few years may have created a few headaches, but it’s what will set it up to dominate over the coming decades as well. Acquiring brands like Star Wars and Marvel have already paid off handsomely, while its mega acquisition for most of Fox has netted a content portfolio that can’t be rivaled by its peers.
In regards to streaming, Disney was a major beneficiary of the novel coronavirus. Its Disney+ platform now has more than 116 million subscribers, while the company has raised prices on its ESPN+ offering twice in the past 12 months due to strong demand. After its acquisition with Fox, it controls Hulu as well, giving Disney a potent three-pronged attack.
On the flip side, Covid-19 crushed its parks operation and continues to loom as a major threat. The expectation is that Covid-19 will eventually dissipate though and Disney will return with a lethal one-two punch — streaming and parks/studios.
With DIS stock basically flat so far in 2021, this one seems like it’s setting up for an eventual push higher.
Caterpillar stock is up about 16% so far in 2021 and nearly 47% over the past year. However, the stock has seemingly fallen out of favor. Although it continues to hold up around the 200-day moving average, shares are down about 14% from the high set on June 4.
Despite a major economic recovery taking place worldwide and many companies and countries catching up on delayed construction projects, Caterpillar remains off its highs. That’s even as the U.S. government discusses a multi-year, multi-trillion dollar infrastructure package.
Case in point?
Analysts expect 20% revenue growth this year and roughly 12% next year. That’s not robust, however, earnings estimates are. Consensus expectations call for 55% growth this year and more than 21% next year. Based on current estimates, shares trade at a reasonable 26 times this year’s earnings.
There could be some upside to Caterpillar stock, particularly if the economy continues to recover. With the global economy recovering as well, this could extend Caterpillar’s growth, as could the infrastructure deal that’s likely coming from the Biden Administration.
The stock’s 2.1% dividend yield is a bonus.
Blue-Chip Stocks to Buy: Visa (V)
Years ago, I wrote an article at my website — Future Blue Chips — about why Visa was indeed one of the blue-chip stocks we should hold. This was circa 2013 and shares were already up almost 200% from its 2008 IPO. Someone reached out, criticizing me for the pick and arguing that they wanted stock picks that were more obscure.
I get wanting a “sexier” stock pick, but at the end of the day, performance is the only thing that matter. And just look at the performance of Visa in that time!
Visa stock is up about 450% since mid-2013, obliterating the overall market’s performance. For what it’s worth, the S&P 500 is up about 180% in that same span.
Despite the obvious success that Visa has enjoyed, it feels like this stock continues to fly under the radar. Or at the very least, we can say that Visa seems under-appreciated. It’s one of those stocks that, despite not putting up robust numbers, simply continues to deliver market-beating results and performs in a consistent, steady manner.
Dipping almost 9% on the latest pullback feels like a buying opportunity in one of the market’s most consistent performers.
FedEx (FDX) or United Parcel Service (UPS)
E-commerce has been a steady, secular grower over the years. With Covid-19 involved, this industry saw a drastic increase in volume in 2021. Just ask any local package distributor or delivery service. As a result, United Parcel Service and FedEx have seen a large uptick in business as well.
That uptick has been happening for years, as Amazon, Etsy (NASDAQ:ETSY) and others have been enjoying continued growth. In time, Amazon may start handling the bulks of its own deliveries, but for now, FedEx and UPS are soaking up the demand — and the dollars.
Despite the strong price action in FedEx, up about 200% from the Covid 2020 lows, shares have struggled lately, down about 16% from the highs. That’s even as analysts expect about 17% earnings growth this year and 11% growth next year, and as shares trade at just 14 times this year’s estimates.
UPS stock is a bit more expensive on an earnings basis, at roughly 18.3 times this year’s estimates. There are pros and cons with this one too. Consensus expectations call for more than 36% earnings growth this year — double that of FedEx — but just 5% growth next year.
Overall, UPS is up 16% from the highs as the stocks continue to consolidate. That seems like it could be an opportunity as we push into the last few months of the year and ahead of the holidays.
Blue-Chip Stocks to Buy: Realty Income (O)
Realty Income has finally clawed back a bulk of its 2020 losses, but it seems like investors have left this one for dead.
The stock hit a new all-time high on Feb. 20, 2020, then promptly fell 55% until it bottomed on March 19. Sadly, the decline made sense. While it was clearly an overreaction, there was too much uncertainty at the time.
What would happen to the economy? Which companies would go bankrupt? Which would not be able to (or choose not to) pay the rent?
Those questions and more are why Realty and a whole host of other REITs saw such intense selling pressure. However, unlike most other high-quality businesses, Realty has yet to regain its pre-Covid high. In fact, it remains about 12% below that mark now.
In an era of low interest rates, the stock’s 4% dividend yield remains quite attractive. Keep in mind, The Monthly Dividend Company is also quite consistent when it comes to its quarterly raises and maintaining its payouts.
Given that the economy has (hopefully) made it through the worst of Covid and Realty did just fine, it seems like it should do fine going forward. With investors seemingly dropping this name and forgetting it, it feels like it’s still a bargain down here.
On the date of publication, Bret Kenwell held a long position in O. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.