With markets down, the opportunity to invest in long-term blue-chip stocks is particularly strong. Will markets head further south in the coming weeks and months? That seems extremely likely given broad macroeconomic indicators and a very hawkish Fed.
However, that doesn’t mean investors should avoid making any stock purchases currently. In fact, proponents of strategies including dollar-cost averaging would strongly suggest that the current market is full of opportunity.
Dollar-cost averaging is one way to minimize the impacts of volatility across markets in 2022. Another strategy is to consider blue-chip stocks alone or in tandem with other time-tested strategies.
While there is no formal definition for blue-chip stocks, they’re generally shares of well-known, established firms that often include a dividend. These are companies that are extremely well prepared to weather a further downturn and will emerge stronger.
|JNJ||Johnson & Johnson||$160.20|
Investors should consider Apple (NASDAQ:AAPL) stock for a number of reasons. Apple is proving to be the best tech stock in 2022.
Apple’s market capitalization of $2.26 trillion makes it the most owned company worldwide as measured by investor capital. A lot of investors have reason to ensure that it remains valuable and will think long and hard before selling significant shares.
Apple, like some blue-chip stocks, also provides a dividend. That dividend currently yields 0.65% and equates to slightly over 23 cents per share each quarter.
I think that makes Apple share interesting because it clearly signifies a long-term shift in which Apple will provide income as well as growth.
It may be less talked about, but Apple’s dividend has a 5-year growth rate of 9.5%. All told, Apple is a great stock in almost any period of a business cycle.
Visa (NYSE:V) is a company that has proven it can thrive over the long term.
The company’s strengths are evident in the returns of V stock over the past 10-year period.
Long-term investors should consider long-term returns. Fortunately, Visa stock has outperformed stocks listed on the same exchange by 299% over that period.
A hypothetical investor who purchased $10,000 of V shares 10 years ago would have $59,584.40 today.
On top of those impressive returns, Visa is also buoyed by favorable trends. It has fared well in 2022 as credit card use increases in the face of inflation.
The increase in fees bodes well for Visa. Visa’s revenue and net income figures have been very strong in the most recent quarter and through the first half of 2022.
At first blush, now doesn’t look like a great time to buy Nike (NYSE:NKE) stock.
The company is coming off a pandemic high during which it had more demand than it could supply. During the pandemic, many firms struggled to keep inventory levels that met demand. Nike, like many of those firms, did everything it could to bulk up inventory.
It worked and now Nike has the opposite problem: Too much inventory. That has led the shoe giant to announce likely discounts in the wake of inventories that swelled 23% in the quarter ended May.
For investors and sneakerheads alike this is a positive as Nike should remain cheap. Immediate macroeconomic-driven trends aside, Nike is strong.
It has outperformed based on EPS figures in each of the past four quarters. Its shares remain overweight. They have 34% upside baked into average target prices. It comes with a dividend and the cache of a global sneaker brand that isn’t going anywhere.
Shares of Microsoft (NASDAQ:MSFT) stock have fallen 29% this year.
That decline has been fairly reflective of the ongoing tech rout that has seen the tech-heavy Nasdaq decline 32%. Neither of those statistics bodes very very well for the Redmond, Washington software and computing powerhouse.
That said, investors have to consider the bigger picture when it comes to Microsoft: It continues to possess fundamental metrics that suggest buying.
I like to look at a few things when analyzing a stock. It’s important to invest in companies that have strong businesses. Microsoft certainly fits the bill as one of the most profitable firms that exist.
The company’s margins and returns are simply excellent. Its net margin, return on equity and return on assets all rank in the top 3% of software firms. That’s exceptionally strong.
Its return on invested capital is above 30%. It’s very difficult to argue that Microsoft is anything other than an exceptional collection of talent working together to create an exceptional software and computing firm.
Whether you’re considering defensive positioning, dividends, or blue-chip status, Coca-Cola (NYSE:KO) makes sense.
One reason to consider now to be an opportune time to buy KO stock is that it acts as a hedge against volatility. Its beta of 0.54 means that it expresses 54% as much volatility as the overall market. In other words, if the market drops 10%, Coca-Cola should only lose 5.4% of its value.
Investors are increasingly looking to the bond market to blunt current volatility. Coca-Cola shares act with much the same effect.
Investors should expect steady growth from KO stock as top-line results continue to increase by about $1.5 billion annually. Of course, KO provides a well-known dividend that hasn’t been reduced since 1963.
I’d venture to guess most readers were born after that which indicates just how valuable a long-term blue-chip KO has been.
Johnson & Johnson (JNJ)
Most blue-chip stocks aren’t flashy. That includes Johnson & Johnson (NYSE:JNJ) stock. It is a well-known, established firm that includes a dividend. It’s also broadly categorized among healthcare stocks which tend to perform well in recessions.
And whether you think we’re currently in a recession, headed into one, or something else, JNJ stock is set to remain strong.
Like Coca-Cola shares, JNJ stock bucks volatility trends and has a beta of 0.61. So, the argument that favors it as a hedge against currently volatility is particularly valid here, too.
Johnson & Johnson has had its share of troubles at the same time. Although sales increased by 3% in the most recent quarter, reaching $24 billion, earnings fell 24.3%.
That said, JNJ shares performed well in the period following that announcement. That’s testament to its strength as a known defensive stock with blue-chip status. Investors who adopt a long-term perspective and purchase JNJ shares have little to worry about.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH) won’t release Q3 earnings for a few weeks. It remains a solid choice anyway.
For one, Q2 earnings showed that UnitedHealth is an exceptional company. Revenues reached $80.3 billion, up 13% on a year-over-year basis. That 13% increase in revenue translated into a 19% increase in operating income during the same period.
The strong results are indicative of a strong company whose stock remains up in 2022, making it a true exception in a sea of red.
The company looks to be in a strong position to acquire Change Healthcare (NASDAQ:CHNG) after a Federal judge denied a request to block the transaction. That means UnitedHealth remains on track to increase the scale of its operations and further cement its position as the biggest healthcare stock by market cap.
The increased scale should give UnitedHealth strong tailwinds when the acquisition occurs. For now, investors should appreciate it as a strong blue-chip worth buying.
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.