Blue-chip stocks are perceived to be capable of surviving market challenges. It isn’t that they are never volatile, only that they are the kind of companies that don’t stay down for long.
When there’s concern about a bubble, the ability to bounce back is important. Many of the companies we’re about to discuss have been helped by bubbles and survived the pops in the past.
What’s more, as the economy becomes more digital, tech stocks have gained blue-chip status. We’ll be looking at tech stocks as compared with the Nasdaq 100 Technology Sector Index, which tracks the best-performing tech stocks.
These blue-chip tech stocks should be able to weather any storm.
- Apple (NASDAQ:AAPL)
- Microsoft (NASDAQ:MSFT)
- Electronic Arts (NASDAQ:EA)
- AMD (NASDAQ:AMD)
- ASML (NASDAQ:ASML)
- Alphabet (NASDAQ:GOOG,GOOGL)
Blue-Chip Stocks to Buy: Apple (AAPL)
In the last year, AAPL stock has returned more than 40% to investors. For the sake of comparison, the NDXT returned 4.73%.
Apple is a safe bet here because it is the largest company in the world based on market capitalization. That market cap stands at $2.62 trillion at present.
Market cap is a reasonable indicator of a company’s ability to weather a storm. Apple’s massive market cap gives it exceptional power, or perhaps it’s simply a reflection of its power. Either way, it’s a beacon of sorts.
Further, Apple simply seems to do well no matter the external challenges. The company reported all-time high revenues in Q1 on the back of record revenue from iPhone, Mac, wearables, and services.
Microsoft, like Apple, has also outperformed the NDXT handily over the past year. It bested the index’s 4.73% return, rising more than 27% in the same period.
If the tech bubble bursts, it will survive for many of the same reasons Apple will.
The argument I’d make for Microsoft isn’t only about scale, it’s also about what the company is able to achieve. There are few firms that are more profitable. The company’s operating margin, return on equity (ROE), and return on assets (ROA) are the best of the best. All of those measurements rank within the top 3-4% across the industry.
It all equates to incredibly strong numbers that rarely disappoint. Microsoft’s revenues increased 20% per its most recent earnings report. That is incredible for a company that large to grow that much. Equally incredible, the firm’s net income growth reached 21%, proving the growth wasn’t sloppy in the least.
Blue-Chip Stocks to Buy: Electronic Arts (EA)
EA stock actually underperformed relative to the NDXT over the past year, but I included it because of the company’s size and relative takeover potential.
EA had a strong 2021 and expects to improve upon its $6.19 billion in 2021 bookings (bookings represent a commitment of customers to spend money over a period of time). The company forecasts that bookings will eclipse $8 billion by 2023.
Strong growth aside, the other reason to consider EA stock is that the company is a potential takeover target. Microsoft is planning to purchase Activision Blizzard (NASDAQ:ATVI).
There are suggestions that EA could be next. ATVI stock surged upward when they announced the acquisition, and EA stock would react similarly if such a deal were to emerge.
AMD has significantly outpaced the NXDT over the past year, posting growth in excess of 48%.
That growth is partly attributable to a rebound in semiconductors overall. Worldwide semiconductor sales growth reached 25% in 2021.
That came on the heels of a period between 2018 and 2020 in which global semiconductor sales decreased from $504.1 billion to $492.6 billion. The good news is that in 2022 global semiconductor sales are predicted to reach $680.6 billion.
Things are going strong at AMD. The company outstripped Wall Street’s already strong forecasts in the latest quarter, posting Q4 adjusted earnings of 92 cents a share. That beat the 76 cents analysts were counting on. Revenue in the period was $4.8 billion, up 49% from a year earlier and above Wall Street estimates of $4.5 billion.
Blue-Chip Stocks to Buy: ASML (ASML)
Tech stocks are often judged by their growth potential as well as the actual growth they experience.
Between 2019 and 2020 ASML increased its net income 39.82%. The Netherlands-based semiconductor equipment manufacturer improved significantly on that figure in 2021 with income topping $6.96 billion, up 71.46% over 2020.
“We experienced higher demand for our systems than our production capacity can accommodate,” said CEO Peter Wennink. “Very strong demand in end markets puts pressure on our customers for more wafer output.”
That resulted in an earnings beat for the company and $2 billion in net income in the quarter.
If Apple and Microsoft survive any bubble based on sheer magnitude, then so too does Alphabet. Like those other giants, it easily outpaced the NDXT over the past year with returns above 36%.
The company made $75 billion in Q4 revenues, representing a 32% increase over the $56.9 billion in revenues a year earlier, but 2021 overall was even stronger. Year-over-year revenue increased 41%, reaching $257.63 billion.
Alphabet is not a defensive play like many blue-chip stocks. It doesn’t even pay a dividend as Apple and Microsoft do. But it is a safe bet. Current expectations are that Alphabet will grow to report in excess of $350 billion in revenues by 2023.
Betting against Alphabet just doesn’t make sense.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.