- If you find the right blue-chip stocks to buy, they can become great long-term investments.
- Volkswagen (VWAGY): The major automaker has suffered from sluggish car deliveries, but its transformation plan is expected to improve its cost structure.
- Glencore (GLNCY): The commodity specialist trades at a discount compared to its book value and should continue to benefit from tight commodity markets.
- Stellantis (STLA): The major automaker delivers a high dividend and has a strong upside potential according to the consensus of analysts.
- AT&T (T): The defensive stock is centering on its core business and is a great investment to own in a turbulent equity market.
- American International Group (AIG): After a strong 2021, there is additional upside for this undervalued lending giant.
- Capital One Financial (COF): Strong execution and cheap valuation multiples make this lending major a value investment.
- Nutrien (NTR): Strong top- and bottom-line growth should continue to support this agrochemical blue-chip specialist.
In the past few months, turbulence in the equity market created long-term opportunities for investors. Large-cap companies have historically been more resilient in bearish markets than mid- or small-cap stocks. Yet, and while rising worries about rising interest rates might trigger an economic recession that will have a significant impact on every industry sector, there are some blue-chip stocks to buy that can withstand the test of time.
Blue-chip stocks are renowned companies with a proven track record that generally operate globally. These companies have a strong brand reputation, have a history of delivering solid returns over time, and tend to regularly increase dividend payouts.
With equity markets entering a bearish trend, here are great blue-chip stocks to buy now, with undervalued valuation multiples that could deliver sturdy returns in the next few years.
|AIG||American International Group||$59.67|
|COF||Capital One Financial||$117.28|
Volkswagen (OTCMKTS:VWAGY), one of the world’s biggest automobile manufacturers performed poorly in the past few months, following sluggish car deliveries generated by the Covid-19 pandemic and parts supply shortages. VWAGY stock decreased 33.38% year-to-date to $20.04 per share, propelling it to a 52-week low. With this decline, it’s now trading at an attractive valuation.
The automobile giant is working to improve cost efficiencies amid challenges like the war in Ukraine, global semiconductor shortage and most recent coronavirus-induced supply shortages from China.
Despite that, VWAGY has adapted fast, expanding operating results before special items by 4.7% in Q1 2022 to €513 million compared to €490 in Q1 2021. Furthermore, Volkswagen’s revenues are estimated to advance at a moderate pace in 2022, up 7.7% to €269.4 billion, whereas net earnings should jump 10.3% to €16.3 billion, increasing profit margins by 15 basis points to 6.08% per year.
More importantly, the automaker had a solid net cash position of €26.68 billion in 2021, offers a high expected dividend yield of 6.13%, and exchanges at 1.42x forward EV/EBITDA, making it one of the cheapest blue-chip stocks to buy now.
Glencore (OTCMKTS:GLNCY) is a major producer and marketer of more than 60 responsibly sourced commodities, including metals, minerals and petroleum products, mainly used in the automotive, steel and food-processing industries. GLNCY stock outperformed equity markets, expanding 10.63% to $11.24 per share, as significantly higher prices prompted by the war in Ukraine supported Glencore’s shares.
In Q1 2022, Glencore’s total production showed, amid temporary hiccups at Katanga mine and Covid-19 absenteeism. Nevertheless, tight physical market conditions and extreme commodity volatility benefited the commodity giant that is now expected to boost net earnings robustly this year, up 265.5% to $18.1 billion, sending net profit margins to a high level of 6.5% compared to peers.
Moreover, after Glencore’s operational slowdown in the past two quarters, the commodity specialist is a bargain at this price and a candidate for our long-term selection of blue-chip stocks to buy. GLNCY trades at low valuation multiples right now, with 2.91x 2022e EV/EBITDA and a 4.21x forward price-to-earnings ratio.
Stellantis (NYSE:STLA), a new group formed from the merger-absorption of Peugeot S.A. in January 2021 and Fiat Chrysler Automobiles N.V., is one of the world’s leading car manufacturers. After the merger, STLA stock reached a high of $21.82 per share in August 2021, but the automobile stock declined 26.46% year-to-date to $14.37 per share, despite an enhancing fundamental picture.
The group released strong top-line growth in Q1 2022, with revenues advancing 12% to €41.5 billion, following a favorable vehicle mix, robust pricing and Forex gains. STLA’s bottom line is, however, expected to slow down, with net profits expected to decrease moderately, down 7.2% to €13.3 billion in 2022, before rebounding by 4.75% to €13.93 billion in 2023.
Nevertheless, the automaker offers one of the highest dividend yields on this list of blue-chip stocks to buy. STLA has an annual expected return of 8.64% per year, which should not leave investors indifferent. Moreover, the average analysts’ price target for STLA stock is $24.31 per share, signaling nearly 70% upside from current levels.
AT&T (NYSE:T) has steered through the past few months’ equity market downturns with ease. In fact, T stock has advanced slightly since the beginning of the year, gaining 6.5%. AT&T has proven once more that it is a great defensive stock to own in turbulent times.
The telecommunication company reported historic high Q1 figures for postpaid phone net adds and fiber broadbands net adds remained robust in the quarter. This helped support the stock’s positive momentum. While most of T’s divisions are on an ascending trend, T’s net sales should dip this year, down 25.2% to $126.2 billion, following the merger of its subsidiary WarnerMedia with Discovery.
With the closing of this transaction, T’s net debt is projected to decrease significantly this year, down 22.1% to $121.7 billion, bringing AT&T’s leverage ratio to a friendlier level of 2.88x. Besides, AT&T will now focus on its core business, planning to invest record levels in the deployment of 5G and fiber, which has strong growth momentum.
T delivers a forward yield of 5.62% and it is one of the best defensive blue-chip stocks to own in a volatile equity market. Besides, T stock trade at an undervalued price of only 6.24x 2022e EV/EBITDA.
American International Group (AIG)
American International Group (NYSE:AIG) is one of the world’s leading insurers that has an attractive valuation and is well-positioned to continue to outperform the equity market in the next few quarters. AIG stock advanced slightly over the year, climbing 2.04% to $58.56 per share and acting as a buffer against bearish equity markets.
After a vigorous 2021 year, where revenues bounced 19% year-over-year to $52.05 billion, AIG reported a slightly lower growth pace in Q1 2022, with net sales advancing 12.2% to $15.8 billion. Nevertheless, analysts expect 2022 to be less fruitful, anticipating revenues to decline 9.9% to $46.9 billion; whereas, net profits should dip 39.9% year-over-year to $5.35 billion.
Despite that, AIG’s profitability should remain in the double-digit spot of 12.1% in 2022, down from an 18% record in 2021. More importantly, AIG trades at a 22% discount compared to its book value or a forward P/B ratio of 0.78x, corresponding to one of the best values in our list of blue-chip stocks to buy.
Capital One Financial (COF)
Capital One Financial (NYSE:COF) has been beaten by the market in the past few months and its stock has plunged 20% year-to-date. Despite this weak performance, COF stock managed to outpace earnings-per-share and revenue estimates over the past seven months and the financial services specialist is a value investment.
COF’s top line is expected to improve in the next two years. Net sales estimates should advance 10.2% to $33.5 billion in 2021 and 6.9% to $35.8 billion in 2022. On the other side, net income is projected to dip 34.2% to $7.8 billion this year and 13.2% to $6.83 billion in 2022. Despite this weakening profitability, profit margins should maintain a robust rate of 23.5% per year.
Besides, the financial services firm offers a moderate dividend yield of 2.09% in 2022. Analysts are bullish on the equity story, delivering an average target price of $163 per share, an upside potential of almost 40%.
Nutrien (NYSE:NTR) is a Canada-based provider of crop inputs and services and a great stock to consider in our selection of blue-chip stocks to buy. Since the beginning of the year, NTR stock has jumped 37%, as agricultural supply disruptions triggered by the situation in Ukraine favored the blue-chip stock.
With this strong performance, the fundamental picture maintains a rapid growth outlook. In Q1 2022, Nutrien released record earnings of $1.4 billion, after a strong retail performance and higher realized prices during the period. Going forward, NTR’s top line is projected to expand 49.6% to $40.19 billion in 2022; whereas, net income should surge 151% to $7.91 billion, representing an elevated net profit of 19.7% agrochemical company.
Aside from the rapid advance of NTR stock, the company still trades at attractive multiples, with a forward EV/EBITDA of only 3.98x and a 2022e P/E ratio of 6.68x. Moreover, analysts see an additional upside, providing an average target price of $111.69 per share, or 7% upside from today’s price.
On the date of publication, Cristian Docan 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.