7 Blue-Chip Stocks to Buy and Hold for the Long-Haul

  • Amid interest hikes and general market volatility, we’ve picked seven blue-chip stocks to buy and hold for long-term value creation through dividends and stock upside.
  • Lockheed Martin (LMT): A strong order backlog and possibility of accelerated growth with escalation in geo-political tensions.
  • Apple (AAPL): Robust cash buffer to invest in innovation and diversification. Services and wearable segments continue to deliver healthy numbers.
  • Costco (COST): Near-term weakness in retail sector is an opportunity to accumulate this quality stock. Strong cash flow visibility in the long-term.
  • Pfizer (PFE): A strong balance sheet, robust cash flows and a deep product pipeline should ensure growth. Aggressive on acquisition front in the recent past.
  • Chevron (CVX): A strong balance sheet and low break-even assets. Big investments planned in the next few years in the renewable assets and core business.
  • AstraZeneca (AZN): Diversified geographical presence and a deep research pipeline. Healthy growth to sustain along with dividend growth visibility.
  • JPMorgan Chase (JPM): A high-quality banking stock that’s trading at attractive valuations and also offers a robust dividend yield.
blue-chip stocks - 7 Blue-Chip Stocks to Buy and Hold for the Long-Haul

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With the Federal Reserve aggressively increasing interest rates by 75 basis points, equity markets have plunged. Amid the fear and uncertainties, I see a golden opportunity for investors to accumulate quality stocks. While I would selectively look at growth stocks, I would be overweight on certain blue-chip stocks in current market conditions.

Coming back to the market correction and an opportunity to accumulate, the following point is worth noting: If we look at the equity market chart for decades, there have been small and big corrections. However, the market has remained in an uptrend.

Smart investors use such corrections to accumulate stocks that can be value creators in the next bull-market. Another important observation is as follows: The Vanguard Large Cap ETF (NYSEARCA:VV) has delivered cumulative returns of 278% in the last 10 years.

Clearly, in a bull-market, it’s equally attractive to hold large-cap or blue-chip stocks. Let’s therefore discuss seven blue-chip stocks that are worth considering.

LMT Lockheed Martin Corporation $418.96
AAPL Apple Inc. $135.87
COST Costco Wholesale Corporation $463.11
PFE Pfizer Inc. $48.11
AZN AstraZeneca PLC $62.83
JPM JPMorgan Chase & Co. $115.83

Lockheed Martin

A Lockheed Martin (LMT) Space Systems sign in Sunnyvale, California.
Source: Ken Wolter / Shutterstock.com

The rise in geo-political tensions is unlikely to be fleeting. There are several points of friction globally. This will translate into steady growth in defense spending.

Among blue-chip stocks, Lockheed Martin Corporation (NYSE:LMT) is a top defense sector pick. For year-to-date 2022, LMT stock has trended higher by 17.5%. However, at a forward price-to-earnings-ratio of 15.5, the stock looks attractive. Additionally, the shares provide a dividend yield of 2.69% at current levels.

It’s worth noting that Lockheed reported an order backlog of $134 billion as of March 2022. With possibility of increase in defense spending for NATO Allies, the backlog is likely to improve in the coming years.

This provides Lockheed with a clear cash flow visibility. The company has guided for free cash flow of $6.0 billion for 2022. FCF is likely to be similar, if not higher, for 2023.

Overall, LMT stock is a quality dividend stock and as revenue growth accelerates, there is visibility for the stock trending higher. A low-beta of 0.76 also makes the stock attractive.


Apple (AAPL) logo on an Apple store in Santa Monica, California.
Source: View Apart / Shutterstock.com

Given the cash flow potential and the balance sheet health, Apple Inc. (NASDAQ:AAPL) is among the top blue-chip stocks to hold. Of course, it goes without saying that the innovation factor gives Apple an edge.

For the second quarter of 2022, Apple reported revenue growth of 9%. For the same period, services revenue touched an all-time high. The company’s wearable segment has also delivered healthy growth.

While the iPhone segment remains the cash cow, emerging segments are likely to ensure that steady growth sustains.

It’s worth noting that as of March 2022, Apple reported $193 billion in cash and equivalents. The company’s annualized cash flow potential is approximately $150 billion.

This provides ample flexibility to diversify and invest in product development. Possible entry into the electric car business is likely to be a growth catalyst. Also, shareholder value creation through dividend growth and share repurchase will sustain in the coming years.

Costco Wholesale

Costco (COST) logo on a sign on a Costco store.
Source: ARTYOORAN / Shutterstock.com

Costco Wholesale Corporation (NASDAQ:COST) stock has witnessed a meaningful correction from 52-week highs of $612. With inflation hitting margins for retailers, the correction was coming. Also, there are fears of a potential recession in 2023.

Even with these near-term headwinds, COST stock is attractive for the long term. It’s worth noting that retail spending is a key growth driver for the U.S. economy. Policy action over the long-term will ensure that retail spending remains robust.

While it may seem that with 829 warehouses globally, Costco has saturated things. However, the company still has just two warehouses in China and none in India. There seems to be ample scope for growth in new markets.

As of Q3 2022, Costco also reported 64.4 million household members. For the last 12 months, the company reported $4.1 billion in membership revenue. As members increase in the U.S. and globally, there is scope for upside in recurring revenue, which is already robust.

Costco has been building strong omnichannel presence and I am bullish on sustained long-term growth.


blue Pfizer (PFE) logo on the windows of a corporate building
Source: photobyphm / Shutterstock.com

Among pharmaceutical blue-chip stocks, Pfizer Inc. (NYSE:PFE) seems like a quality pick at current valuations. The stock currently trades at a forward P/E of 7.0 and also offers investors a dividend yield of 3.3%.

In the last 12-18 months, the drug maker’s cash flow has got a major boost from Covid-19 vaccine sales. While vaccines sales will decline on a relative basis, there are two important points to note.

One is that Pfizer has been aggressive in terms of acquisitions in last few quarters. With strong financial flexibility, the company is well positioned to inorganically boost the product pipeline.

Further, Pfizer has a deep organic pipeline. As of May 2022, the company reported a pipeline of 96 drug candidates. Of this, 29 drug candidates are in Phase 2 with another 6 in the registration phase. This is likely to ensure steady growth in revenue and cash flow upside in the next few years.

Overall, PFE stock has upside potential from current levels. Additionally, the dividend yield is attractive and dividends are sustainable.

Chevron Corporation

Chevron has Put a Priority on Protecting Its Big, Fat Dividend
Source: Denis Kuvaev / Shutterstock.com

Chevron Corporation (NYSE:CVX) has been in an uptrend with surging oil price. CVX stock is also among the top holdings in Warren Buffett’s portfolio. I believe small correction would provide a good opportunity to accumulate this blue-chip stock.

Chevron has high quality assets with a low break-even. With Brent crude trading above $100 per barrel, the company is positioned for annualized cash flows in excess of $30 billion. Further, with an investment grade balance sheet, the company is positioned to sustain dividends and aggressively invest in growth. As of Q1 2022, Chevron reported a net-debt-ratio of 10.8%.

Chevron has already planned capital investments in the tune of $15 to $17 billion annually for the next few years. Significant investment in renewable assets is also on the cards. Recently, Chevron completed the acquisition of Renewable Energy Group. This will boost the company’s renewable fuels production capacity to 100,000 barrels per day by 2030.

Overall, CVX stock is a potential long-term value creator through dividends and share repurchase. Additionally, the stock is likely to remain in a long-term uptrend.


Exterior of the AstraZeneca's manufacturing facility at Snackviken
Source: Roland Magnusson / Shutterstock.com

AstraZeneca PLC (NASDAQ:AZN) is another pharmaceutical name that I would add in the list of blue-chip stocks to buy. AZN stock trades at an attractive forward P/E of 14.9 and also offers investors a robust dividend yield of 3.3%.

AstraZeneca is attractive from a long-term perspective considering the deep project pipeline. Currently, the company has 183 projects in the pipeline. As new drugs enter the market, revenue growth is likely to be healthy.

It’s also worth noting that the company is well diversified from a geographical perspective. For Q1 2022, 44% of the revenue was from emerging markets. Wider geographical coverage coupled with drugs for diversified disease areas makes AstraZeneca attractive.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

From a financial perspective, the company reported net debt of $25.2 billion as of March 2022. However, debt is not a concern with cash flows likely to remain robust in the coming years. The company commands an investment grade credit rating.

JPMorgan Chase

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JPMorgan Chase & Co. (NYSE:JPM) stock has been depressed, off 27% in the last six months. I believe that the correction provides an attractive entry point for long-term investors. The blue-chip stock trades at a forward P/E of 10.0 and also offers investors a dividend yield of 3.5%.

With concerns related to a potential recession, the banking sector might see relatively higher loan delinquencies. However, JPMorgan Chase has a strong balance sheet to navigate challenging times. Importantly, the stock seems to have discounted these concerns.

With rising interest rates, the bank is expected to deliver higher net interest income margin. On the other hand, turbulent equity markets might imply that investment banking growth is muted.

However, even with a near-term headwind, analysts expect the company’s earnings to grow at a CAGR of 5% over the next five-years. Therefore, dividends will sustain and JPM stock looks attractive at current valuations.

On the date of publication, Faisal Humayun did not hold (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.

Article printed from InvestorPlace Media, https://investorplace.com/2022/06/7-blue-chip-stocks-to-buy-and-hold-for-the-long-haul-jpm-pfe-azn-lmt-aapl-cost/.

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