- These undervalued blue-chip stocks possess excellent long-term potential.
- Micron (MU): Semiconductor stock that blends growth and low valuation.
- Alcoa (AA): Net income growth bodes very well for the commodities giant.
- Nutrien (NTR): The undervalued Canadian firm is vital to food production.
- American International Group (AIG): AIG’s upside is attractive and its staid dividend smooths current volatility.
- 3M (MMM): Four straight earnings beats suggest 3M will remain strong, and it’s cheap now.
- Microsoft (MSFT): Microsoft continues to perform exceptionally well, but it’s discounted despite its overwhelming buy status.
- Pfizer (PFE): Vaccine sales will fuel future growth, making Pfizer noteworthy.
With the ongoing market correction, there are bound to be multiple undervalued blue-chip stocks for sale at excellent prices. For investors who’ve long held positions in these equities, the correction is troublesome. Gains have been erased. Of course, one investor’s loss is often another’s gain — and right now is a strong time to pick up blue-chip stocks while they remain undervalued.
These stocks are household names and trade with massive market capitalizations. They’re usually industry leaders and often the biggest player in their respective sectors. They boast dependable earnings, substantial operating histories and often pay dividends as well.
With that said, let’s look at the best deals among undervalued blue-chip stocks to buy in June.
|AIG||American International Group||$56.96|
Micron (NASDAQ:MU) is a U.S.-based semiconductor company that often fails to garner as much attention as similar firms. That said, there’s plenty to appreciate about it. It makes DRAM, NAND, and NOR memory and storage technology, but is rarely mentioned alongside AMD (NASDAQ:AMD) or Nvidia (NASDAQ:NVDA).
That said, MU stock is very much worth considering right now. High-level metrics clearly suggest there’s massive upside in it at current prices. The equity boasts an average target stock price of $111.45 but can be purchased for under $70 currently.
The reason it’s worth considering is that MU stock is slated to grow as measured by net income while likely increasing its dividend. All the while, it remains cheap based on price-to-earnings (P/E) ratio.
Its 8.5x P/E ratio is well below the 19.16x average across the semiconductor industry. If you want bottom-line growth at a cheap price, Micron is absolutely worth picking up.
Alcoa (NYSE:AA) produces bauxite, alumina and aluminum products. Its business is mundane and by most standards, it isn’t likely to excite investors on that alone. However, the upside in AA stock should.
It is trading lower over the past few weeks, but it hasn’t lost value overall in 2022. Yes, it possesses upside based on consensus analyst prices. Those estimates suggest a potential increase of nearly 50% at AA stock’s current price.
The reason investors should believe share prices can rise quickly lies in the bottom-line growth predicted for the firm. In 2021, Alcoa’s $12.2 billion in revenue led to a net income of $429 million.
In 2022, that revenue is anticipated to increase by more than 18% to $14.4 billion. That’s nice enough growth, but what really should impress is the notion that Alcoa’s net income is expected to nearly quintuple at the same time. The company’s net income is expected to reach $2.1 billion in 2022.
It’s hard to read about markets and not come across a headline about the increasing value of food production and cropland. They imply companies like Nutrien (NYSE:NTR), which produces potash, nitrogen and phosphate, will have more importance moving forward.
Increasing food production will require more land under cultivation, which in turn requires more fertilizer use that includes the products Nutrien produces. That’s the underlying macroeconomic argument that favors the company.
The fundamental argument that favors NTR stock is its valuation relative to its peers. The firm’s 13x P/E ratio is slightly lower than the industry median of 15.1x. That is wildly lower than its industry, which is a positive. Stocks that are severely undervalued often suffer due to factors outside of what their fundamentals can explain. In other words, Nutrien is not a value trap.
The company is growing following record first-quarter earnings of $1.4 billion. Both revenue and profit are expected to continue to surge as the Canadian firm responds to fill the void created by the ongoing war in Ukraine.
American International Group (AIG)
The insurance industry is not an exciting business. Therefore, it is to be expected that insurance stocks carry low valuation metrics. That said, AIG (NYSE:AIG) stands out among its peers in terms of value.
The stock’s P/E ratio of 5.8x is roughly half that of the industry overall, which sits at 10.7x. That doesn’t tell us much, because the market could simply prefer an average insurance firm to AIG. If that were the case, then its much lower valuation wouldn’t be an opportunity.
But it is an opportunity because AIG stock’s median P/E ratio over the last 10 years is 9.85x. That strongly implies once we exit the current market — whenever that may be — then AIG stock should fare much, much better.
When that capital returns, share prices will rise. Until then, current investors also have a modest and reliable dividend yielding 2.3% to look forward to.
3M (NYSE:MMM) produces a lot of products — in fact, more than 60,000 of them. So it’s almost inevitable that you’ve used one or more of them in the past. But it isn’t the breadth of product offerings that makes MMM stock interesting to value investors as much as current prices.
3M shares began 2022 trading around $180. However, they’ve fallen to a range between $140 and $150 as of early February. They’ve since struggled to escape that range.
But there’s reason to remain enthusiastic about the firm’s prospects. For one, it has exceeded analyst expectations in each of the past four quarters and provided earnings beats. And each of those four quarters has exceeded the high points of analyst ranges.
One valuation suggests MMM stock should trade at $186.80 based on several historic multiples.
When 2022 began, Microsoft (NASDAQ:MSFT) stock was trading at $335. That wasn’t far from its target stock price of $360. So it would have been much harder to proffer the idea that there was massive upside in it back then.
That was also before inflation was the dominant issue it now is, and the tech wreck hadn’t yet done much damage. Fast forward a few months and the story is vastly different. Microsoft shares trade near $250. However, analysts remain steadfast, with the overwhelming majority rating it a buy.
Microsoft continues to perform amazingly well, though. Its most recent earnings showed that revenues increased 18%, reaching $49.4 billion in the quarter. I could go on and on about Microsoft’s impressive results, but the point is that when the market offers MSFT stock cheap, buying just makes sense.
Pfizer (NYSE:PFE) received a modest bump on May 20 when it was announced that the Centers for Disease Control and Prevention (CDC) had cleared its booster for use in children ages 5 to 11. While that news indicates a new revenue stream for the company, its prospects moving forward are less about Covid-19 vaccines and more about leveraging the proceeds from that business.
Investors believe Pfizer is losing its sheen as the pandemic enters its later stages. PFE stock has lost about 5% of its value year-to-date. But it was one of the winners in the race to develop a vaccine for Covid-19. That ensures the company has money to develop and acquire future potential blockbuster drugs.
It’s now cheap, well-funded and in position to remain so for the long term.
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.