We’ve had a strange market so far in 2023, but one that’s at least forced investors to look for quality stocks. Despite all the action so far, we’re not necessarily out of the woods (more on that in a minute). That’s got investors looking for blue-chip stocks to buy — and rightfully so.
However, I want to go a step further — I want the best blue-chip stocks in the event that the market comes under significant selling pressure. That doesn’t necessarily mean classic blue-chip stocks either.
2023 has not been an easy market for investors. After all the pain of 2022 and the horrendous start to 2023 for big-cap tech, the market roared higher. Ironically, it was led higher by big-cap tech. In any case, the indices have traded pretty darn well in the first four months of the year. So far, May has been a bit trickier.
That’s as we’re in the midst of earnings season, the bank failure situation is not fully resolved. First Republic (NYSE:FRC) just failed and the Federal Reserve has initiated another rate hike.
Let’s dig in. The best blue chip stocks to buy of 2022 may not be the best blue-chip stocks of 2023, but we’re going to comb over all of them.
Johnson & Johnson (JNJ)
Traditionally defensive stocks have had momentum, while healthcare stocks gave investors a great trading opportunity in April. Yet, Johnson & Johnson (NYSE:JNJ) has failed to garner much momentum.
Despite this reality, J&J is a stellar firm with a long history of consistency. As much as I’d like to see JNJ hold up amid a market-wide deterioration, the recent momentum does not leave me confident that that would be the case. In any regard, this stock should not be ignored. In fact, just the opposite is true amid a market-wide downturn.
Shares trade at less than 15 times earnings despite analysts expecting mid-single-digit revenue and earnings growth this year. Further, the company just raised its dividend for the 61st consecutive year.
While the company’s growth is not blowing off the roof, it’s reasonable valuation and dependable dividend are worth grabbing if shares are on sale.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) being called one of the best blue-chip stocks to buy if the stock market retests its 2022 low will draw some ire. At least, it did when I said as much in mid-2022.
But the simple fact is, so much of today’s technology is powered by GPUs. I don’t disagree that Nvidia could see a pullback (and a sizable pullback in the event the S&P 500 retest its 52-week low). I don’t disagree that its valuation is high or that it could have an inventory issue.
However, I would argue that should we see a significant decline and that this company is worth buying into.
Not only is it the top-quality GPU manufacturer in the world, but it’s powering many different industries within tech. Perhaps the most talked about sector is now AI. Analysts expect solid earnings and revenue growth this year and next year and, if you need any more proof that Nvidia would be a buy on a deep and painful dip, just look at how it has performed from the October 2022 low (up almost 170%).
Microsoft (MSFT)
When I looked at Nvidia as a buy last year, Microsoft (NASDAQ:MSFT) was also on the list. At the time, I was looking for a decline into the low-$200s, implying a peak-to-trough decline of more than 35%.
That pullback ended up coming to fruition, as Microsoft stock tanked hard. I don’t know how far shares would really fall if the S&P 500 were to retest its 2022 lows. Because of this, I was tempted to go with Broadcom (NASDAQ:AVGO), another holding I would consider to be a blue-chip stock.
Microsoft just reported strong earnings and has built up a quick but strong presence in AI. As a result, I don’t know that it would come down all that much in a stock market correction. If it did though — and shares traded back into the $230s or so — it would be a time for investors to take a closer look.
Microsoft has many upsides here, including strong financials, dependable cash flow and long-term growth levers. One downside it has? Shares trade at more than 31.50 times this year’s earnings while analysts expect just mid-single-digit revenue and earnings growth.
On the date of publication, Bret Kenwell held a long position in JNJ. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
