Smart Picks: 7 Blue-Chips Trading Below True Value

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  • Broadcom (AVGO): Broadcom wins as long as AI continues growing. 
  • American Express (AXP): If card members keep spending like this AMEX will be fine. 
  • Taiwan Semiconductor (TSM): TSM shares are too cheap right now.
  • Keep reading for more blue-chip stocks trading below true value!
Blue-Chip Stocks - Smart Picks: 7 Blue-Chips Trading Below True Value

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Blue-chip stocks are shares of well-established, stable firms that pay dividends in most cases.

It’s that combination of stability and dividend income that makes them so attractive. So, investors should scoop them up when they find blue-chip stocks that are undervalued. 

One of the other benefits of investing in blue-chip stocks is that they tend to weather market challenges better than other classes of stocks.

That’s particularly pertinent at the moment: The Fed has signaled that rates will be higher for longer which is likely contributing to rising levels of investor fear overall.

Beyond that, the tech sell off continues and investors are likely to flock to relative safety as a result. 

Broadcom (AVGO)

broadcom (AVGO) logo outside office building
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There are plenty of reasons to believe that Broadcom (NASDAQ:AVGO) stock is undervalued.

The most obvious of those reasons is simply that Wall Street believes that to be the case. Analysts there expect prices to move nearer to $1,000 while shares currently trade for $800. 

Broadcom is a chip supplier to major tech firms. Those relationships result in substantial revenues that have large affects on the company.

Thus, rumored changes in those relationships have affects on Broadcom’s stock. Take, for example, recent rumors that Broadcom’s long-term deal to supply AI chips to Google was in jeopardy. The rumors present a problem for Broadcom. However, Google has refuted those rumors explicitly. 

Broadcom is also expected to officially close its deal to acquire VMWare (NYSE:VWM) on Oct. 30. The closing will bolster Broadcom by giving it an increased position in cloud and enterprise software and is expected to spike prices. 

American Express (AXP)

the American Express logo etched into wood
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Wall Street and Main Street already dinged American Express (NYSE:AXP) stock when the company released earnings in late July. Shares tumbled even as earnings per share reached all-time highs and profits remained strong. 

The problem is that payment volumes aren’t as strong as they previously were. Total network volume growth fell into the single digits for the first time in more than a year. Investors worried that the change implied imminent trouble ahead.

Yet at the same time, American Express reaffirmed its 2023 earnings guidance. The company is bracing for defaults which is worrying investors.

The company increased its default provisions in response. While that should help, I’d also note that American Express caters to a wealthier clientele that continues to spend at record levels.

Are defaults a growing concern as credit card debt has passed $1 trillion? Absolutely. However, American Express is relatively shielded due to the creditworthiness of its members. Which is what makes it one of the more undervalued blue-chip stocks.

Taiwan Semiconductor (TSM)

image of TSM semiconductor office building
Source: Sundry Photography / Shutterstock.com

Generally speaking, it’s a good idea to scoop up Taiwan Semiconductor (NYSE:TSM) shares whenever the stock stays lower for long without major issues.

The problem currently is that Taiwan Semiconductor forecasted a weakening outlook in the middle of the summer. The company has to work through inventory that built up during the pandemic but don’t be surprised if it surges in early 2024. 

Taiwan Semiconductor is still the largest semiconductor foundry by a long shot. The generative AI opportunity continues to be a massive benefit to the manufacturer which supplies the leading firms in the space.

Pick it up now for the dividend income, which has a higher yield since prices have fallen. Hold on to it because it’s certain to rise. There is no other firm can do what it can, which is why it’s one of the better blue-chip stocks for long-term growth.

The company is highly likely to add packaging capabilities in Arizona which would further increase its investment in the state in which 2 fabrication plants already exist.  

Pfizer (PFE)

blue Pfizer logo on the windows of a corporate building PFR stock
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Pfizer (NYSE:PFE) stock is undervalued for very obvious reasons. Eventually, investors are going to realize that is the case and when they do, prices will rise. 

The issue is simple: Pfizer is expected to report roughly $62 billion in sales this year. Pfizer made $41 billion in 2020. It’s a steal from that perspective because it traded at the same levels then despite producing $20 billion less in revenues.

However, investors are stuck in a 2022 mindset. Pfizer reported $100 billion in sales then. It produced a blockbuster drug for Covid-19 but that’s the kind of opportunity that happens perhaps once in a century. 

I’d buy Pfizer for the simple reason that investors are being unreasonable based on the top-line growth from 2020 to 2023.

That hasn’t convinced investors yet. However, Pfizer plans to introduce nearly 20 new drug launches in the next year which will help ease concerns. New booster recommendations should also help which is why it’s better to get in now before everyone else catches on. 

Walmart (WMT)

A photo of the Walmart (WMT) logo on the side of a truck.
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Walmart (NYSE:WMT) is a fairly amazing stock and company when you think about it.

It’s the largest retailer globally with a strong concentration in the U.S. It’s fair to suggest that Walmart approximates the U.S. in some regards. 

If you agree with that, then also consider this: U.S. Q2 GDP grew by 2.4% while Walmart’s revenues increased by 5.7%. It isn’t an apples to apples comparison but it’s one way of suggesting that Walmart is faring very well. 

The firm’s U.S. sales actually grew by 5.4% in Q2. Further, Sam’s Club sales (fully U.S. based) were flat. That is perhaps the best approximation by which you can compare Walmart to the U.S> economy and it remains favorable. 

Walmart is growing its international segment quickly, up 13.3% in Q2. Ecommerce sales are a particular bright spot for Walmart and grew by more than 24% in Q2 and surpassed $80 billion in 2023 in total.

Nike (NKE)

A stack of red Nike (NKE) shoe boxes.
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Nike (NYSE:NKE) shares remain underpriced, but it deserves to trade lower. 

The company has issues across Asia and in China particularly where sales are lagging. Forward guidance for the third quarter did not impress Wall Street.

That hurt because it came after a second quarter in which the company posted its first missed profit guidance in the last several years. In short, Nike’s shares very much deserve their weak reception in the market currently. 

You probably see where I’m going with this. Nike is too big and too strong to suffer this fate for much longer.

It’s a good time to make a bet on Nike’s rebound. NKE shares haven’t traded this low since late 2019 which is fair reasoning for establishing a position given its market position. 

AMD (AMD)

Sign of AMD office in Markham, Ontario, Canada. Advanced Micro Devices, Inc. is an American multinational semiconductor company.
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I’ve been pumping up AMD (NASDAQ:AMD) and its stock for the last several weeks and months.

The results speak for themselves. I haven’t been correct thus far. AMD has gone from $110 to $95 during the last few weeks and those who established a position during that time haven’t profited. 

I stand by everything I’ve said about AMD. It’s the strongest challenger to Nvidia’s (NASDAQ:NVDA) chip dominance in the generative AI space. That hasn’t changed. What has changed is the overall economic outlook.

The Federal Reserve has signaled that it intends to hold interest rates higher for longer than many had anticipated earlier. That has investors worried about the economy overall which is rippling acutely through the more volatile tech sector. 

It’s going to be hard to ignore the chatter but those who do can pick up shares for cheaper prices than they could have just days ago.

Maybe I’ll be wrong again and AMD prices will fall again. Pick it up then because in either case AMD is going to emerge stronger and become much more valuable over the next several years. 

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.


Article printed from InvestorPlace Media, https://investorplace.com/2023/09/smart-picks-7-blue-chips-trading-below-true-value/.

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