While arguably most financial advisors will recommend their clients to bulk up their portfolios with proven large-capitalization ideas, you can leverage the present market dynamics in a nuanced manner with overlooked blue-chip stocks to buy. Rather than go with the flavors of the week, you may enjoy higher-probability successes by dipping a bit beneath the radar.
Why might this strategy be appropriate under the present context? For one thing, when everyone bets on the same horse, the payout for each individual tends to diminish. However, some of the biggest gains in the broader capital markets typically stem from ideas that people weren’t paying attention to. Therefore, the subsequent rush of excitement as the public catches on could buoy overlooked blue-chip stocks to buy.
Another factor to consider is the balanced nature of large-cap firms. Yes, it’s admittedly far more exciting to wager on groundbreaking technology firms. However, in a downturn, these ideas could drop further or even implode altogether. On the flipside, by electing overlooked blue-chip stocks to buy, you’re engaging quality companies: It’s just that the rest of the market hasn’t recognized it yet.
|BTI||British American Tobacco||$40.23|
With a market cap of $95 billion, Caterpillar (NYSE:CAT) might not immediately strike you as one of the overlooked blue-chip stocks to buy. Indeed, throughout the runup to the 2016 presidential election, the industrial equipment manufacturer represented one of the key talking points.
Nevertheless, with the mainstream media focusing recently on brewing global recession fears, it’s understandable why many investors would now regard CAT as one of the overlooked blue-chip stocks. If a downturn hits us, the international community probably wouldn’t be too keen on building stuff.
But then, here’s the other side of the coin (literally). Rising inflation and the associated loss of purchasing power means that astute investors are looking for wealth-preserving assets. Historically, precious metals have been reliable safe havens and this narrative could rise once again. Should this happen, Caterpillar could easily go along for the ride as the company is a stalwart in the mining equipment sector.
General Motors (GM)
It’s tough being in the automotive industry right now. Yes, if global growth slows down due to inflation and other headwinds, consumer demand could fade, resulting in the easing of the semiconductor crisis. Theoretically, that would be a positive for General Motors (NYSE:GM). But then, the aforementioned loss of demand would impose a Pyrrhic victory.
As well, GM has plenty of competition. Electric vehicles have been exploding in popularity over the years and the military conflict in eastern Europe has only exacerbated this trend. Therefore, the fundamental realities of the auto sector suggest GM is overlooked.
But in my view, it’s one of the overlooked blue-chip stocks to buy. Sure, GM has tanked 48% on a year-to-date basis, let’s just keep it real. At the same time, it might be a substantially discounted opportunity because the company is rolling out exciting products for the green crowd and the gearheads.
The upcoming GMC Hummer EV should bring a macho cool factor to SUV ownership while the eighth-generation Corvette has been absolutely killing the sports car segment.
When the topic of overlooked blue-chip stocks to buy came up, DuPont (NYSE:DD) was among the companies that came immediately to mind. Like other applied science and industrial chemicals firms, DuPont is vital to the economy. It’s just that few people talk about these companies. They physically undergird much-discussed innovations, but they’re not the innovation itself.
However, the boring nature of DuPont might make it an ideal candidate for a market comeback. To be fair, the comeback may take time, but it should be worth it. For instance, DuPont is actively researching flexible printed circuits, which “can be bent, folded and configured in nearly any shape or thickness imaginable.” Such circuits would have enormously positive implications for electric vehicles as well as 5G and the Internet of Things.
Further, DuPont produces materials that are practical right now, such as Kevlar. This synthetic lightweight fiber offers myriad applications, including automotive, aerospace and military/defense.
One of the forefathers of the big technology market, IBM (NYSE:IBM) long dominated the sector thanks to its unparalleled computer technologies. But as computing gradually transitioned from on-premise platforms to the cloud, “Big Blue” started to lose its edge to other popular tech firms. Over the years, IBM stock languished in frustrating sideways consolidation patterns.
However, this appears to be changing. For instance, IBM is up nearly 4% YTD; whereas, the technology-centric Nasdaq index is down 24% during the same period. In fairness, in the trailing five years, shares have declined by 4% — not exactly riveting stuff. But as the popular big tech giants are struggling, it’s very encouraging that IBM is rising.
Fundamentally, this contrast can continue operating in Big Blue’s favor. The company is making investments in myriad sectors, including artificial intelligence, cybersecurity and even the blockchain. As well, it’s gaining ground in the cloud space with its Red Hat acquisition.
An American multinational firm specializing in managed healthcare and insurance, Cigna (NYSE:CI) is somewhat like a bail bondsman. It’s better to know one and not need it than need it and not know one. As such, Cigna is one of the overlooked blue-chip stocks but as you might imagine from the title of this article, it should belong on your buy list.
Frankly, the catalyst for Cigna’s bullish case is cynical. Healthcare and insurance products are always relevant. However, they can be more so during a market downturn. Should a recession really be on the horizon, you can expect consumers to cut down on their spending. However, core services like health insurance will be the last to get cut because they basically help prevent utter financial devastation.
Not surprisingly, CI has been a strong performer this year, gaining around 20% since the beginning of January. With the benchmark S&P 500 down almost 19% during the same period, CI looks mighty attractive.
Regarding the biotechnology and pharmaceutical space, the coronavirus pandemic imposed a bifurcated all-or-nothing dynamic. If you were directly working on a Covid-19 vaccine, your stock went up. Right now, Covid has become far less of a concern. However, the monkeypox outbreak may have some investors thinking about highly specialized biotech firms.
Yet again, AbbVie (NYSE:ABBV) finds itself on the outskirts of the hottest trends of its underlying industry. But on the positive front, that just makes ABBV one of the overlooked blue-chip stocks to buy. While the company offers many exciting products in its pipeline, I’m particularly interested in Botox, the neurotoxin that basically acts as the pharmaceutical fountain of youth.
Indeed, some patients are getting Botox at a young age as a preventative measure against the signs of aging. Either way, with Covid-19 fears declining, more socialization opportunities will sprout. That makes ABBV a smart but somewhat cynical idea for overlooked blue-chip stocks to buy.
British American Tobacco (BTI)
British American Tobacco (NYSE:BTI) is one of the overlooked blue-chip stocks and many would argue for good reason. Thanks to multiple public service announcements, anti-tobacco advocacy groups have succeeded in helping to reduce smoking rates. Further, these trends are noticed worldwide. With the practice falling out of favor, you’d think that BTI would also be plunging.
Yet the stock has performed fairly well among non-hydrocarbon-related securities, gaining around 6% YTD. On a longer-term basis, shares have been rising since 2019. It begs the question, what the heck is going on here?
Certain scientific data suggests that “the propensity to become a smoker increases significantly during an economic downturn.” Considering the global inflation problem along with the possibility of upcoming job losses, the situation doesn’t look particularly bright. This might drive more demand for tobacco products.
And while cigarette smoking may have lost its luster, vaping has risen dramatically. So, BTI is relevant though you’re going to have to come to terms with the underlying controversy.
On the date of publication, Josh Enomoto 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.