While there are many ways to position yourself in the market during this ambiguous juncture, one of the most straightforward approaches involves targeting blue-chip stocks to buy on the dip. By definition, blue chips represent industry stalwarts with strong financial backbones. As well, they’re typically household names.
Fundamentally, the advantage of blue-chip stocks to buy on the dip centers on trust. Unlike unproven, speculative ventures, investors enjoy a measure of confidence that the red ink will eventually turn to black. To be 100% clear, no guarantees exist. However, because these giants leverage long histories, it’s more than likely they’ll weather the present storm.
Second, blue chips benefit from the presence of strong backers. With institutions and various investment and retirement funds often tied to these stalwarts, the pressure is on for the underlying leadership teams to do what’s best for shareholders. In a way, these entities are forced to have your back. And on that note, below are blue-chip stocks to buy on the dip.
Faced with stubbornly high inflation and weak consumer sentiment relative to pre-pandemic norms, Nike (NYSE:NKE) seems a risky enterprise. Yes, retail revenge was a thing back during the worst of the pandemic. However, revenge travel has taken over much of the allocation of discretionary spending. And even this segment may be facing significant headwinds.
So, given the broader context, it’s not surprising to see encounter volatility this year. Since the January opener, NKE fell nearly 13%. Further, an Axios report in August noted that piled-up inventory for the athletic apparel manufacturer added to the downcast sentiment. Still, it’s important to look at the bigger picture.
For me, that bigger picture is the gross margin. This metric is stable at around 43% to 44%, which roughly matches historical norms. So, Nike isn’t hurting profitability to boost revenue. Therefore, it’s one of the blue-chip stocks to buy on the dip that you can trust. Analysts peg NKE as a consensus moderate buy with a $118.25 target, implying 14% upside.
A multinational technology giant, Qualcomm (NASDAQ:QCOM) specializes in semiconductors, software and services tied to wireless innovations. On paper, it should be one of the most relevant enterprises and it is just that. However, the influx of options trades with expiration dates of April 2022 through December of this year may have pushed down QCOM shares.
Specifically, Fintel’s options flow screener – which targets big block transactions likely made by institutions – shows the average strike price of the highest-volume options tend lower over the aforementioned time period. However, for options expiring March 2024 to January 2025, the strike price range appears to rise, implying gradual sentiment recovery.
Also, let’s look at the financials. Presently, QCOM trades at 12.02x forward earnings. In contrast, the sector median stands at a loftier 20.5x. Therefore, it’s a candidate for blue-chip stocks to buy on the dip. Analysts rate QCOM a moderate buy with a $135.35 target, implying 22% growth.
Abbott Laboratories (ABT)
A medical devices and healthcare company, Abbott Laboratories (NYSE:ABT) primarily focuses on diagnostics, branded generic medicines and nutritional products. While it offers myriad relevancies, the market has been unkind to ABT. Since the beginning of the year, ABT surrendered almost 13% of equity value. Still, the narrative may be shifting, making Abbott one of the possible blue-chip stocks to buy on the dip.
Just recently, Barron’s reported that the company posted third-quarter earnings of $1.14 a share on revenue of $10.1 billion. In contrast, analysts expected Abbott to post earnings per share of $1.10. Also, the healthcare giant beat the revenue consensus of $9.82 billion. And while revenue declined slightly on a year-over-year basis, sales in the nutrition, established pharmaceuticals and medical-device segments all increased.
Also, it didn’t hurt that management narrowed its EPS guidance for 2023 to $4.42 to $4.46. As well, the midpoint ($4.44) represented a lift from the midpoint guidance disclosed in Q2 of $4.40. Analysts peg ABT a moderate buy with a $120.10 target, implying almost 26% upside potential.
A powerhouse in the entertainment industry, Disney (NYSE:DIS) offers plenty of long-term intrigue. But in the near term, it’s testing investors’ patience. Since the beginning of the year, DIS fell almost 5%. In the past 365 days, shares slipped more than 14%. After flying higher from late 2020 to September 2021 (almost mirroring cryptocurrency sentiment), Disney has conspicuously lost its touch.
Still, it might make a case for blue-chip stocks to buy on the dip. For one thing, Disney secured a new distribution agreement with Charter Communications (NASDAQ:CHTR), resolving an ugly dispute. Second, the Magic Kingdom, while suffering from various headwinds against its business units, still levers a considerable entertainment library. With a few tweaks, it could potentially win back audiences.
And that’s really the driving force here. Disney is a great company that has lost its way. Doubling down on what works and axing what doesn’t should help the brand considerably. Overall, analysts rate DIS a moderate buy with a $106.67 target, implying 26% growth.
Estee Lauder (EL)
A powerhouse in the beauty care industry, Estee Lauder (NYSE:EL) seemingly should be rising higher above the muck. After all, with Covid-19 fears plunging, people are ready to reclaim their normal lives. And that involves personal care products. However, EL has become arguably the riskiest idea on this list of blue-chip stocks to buy on the dip. You must exercise caution here.
Since the start of the year, EL dropped over 45% of equity value, which is startling. What’s worse, the implosion isn’t exactly unjustified. In August, The Wall Street Journal reported that EL fell after a disappointing profit forecast. Nevertheless, as the last vestiges of pandemic realities fade – including the supposedly permanent shift to remote operations – Estee Lauder may benefit from increased demand.
To be fair, EL isn’t the easiest gamble because of its 38.2x forward earnings multiple. That’s way high compared to the sector median 15.18x. Still, it’s consistently profitable and features strong margins. Also, analysts peg EL a moderate buy with a $175.17 target, implying over 26% growth.
From the riskiest idea among blue-chip stocks to buy on the dip to the most controversial, Anheuser-Busch (NYSE:BUD) can’t seem to get back on consumers’ good graces. Mention its Bud Light brand and you’re quickly inundated with reminders about how “woke” the underlying company is. Still, I’m sticking with BUD to make an eventual comeback.
First of all, I don’t think there’s enough evidence to suggest that if you go woke, you go broke. For example, Molson Coors (NYSE:TAP) got a nice boost, gaining 20% so far this year. However, in the trailing month, it’s down 7%, basically matching BUD’s underperformance during the same period. Also, Nike went woke in a big way in supporting Colin Kaepernick, which in the long run didn’t really harm NKE.
And that’s probably the biggest point. In the long run, Bud Light makes cheap and tasty (though I must personally disagree) beer. During a possible downturn, BUD should wind out. Analysts rate shares a strong buy too, projecting a $69.72 price which implies 31% upside.
A classic favorite among video game systems, Nintendo (OTCMKTS:NTDOY) deserves some consideration for blue-chip stocks to buy on the dip. Since the beginning of the year, NTDOY slipped a bit more than 4%. That’s not the greatest de-risking, to be fair. However, in the trailing one-month period, shares gave up more than 7% of equity value. Lack of visibility – being traded in the over-the-counter market – doesn’t help matters.
Still, Nintendo makes a fundamentally compelling case at this juncture. True, the consumer economy isn’t operating at its most robust setting, if you will. Nevertheless, during a downturn, conditions can get emotionally taxing for the impacted. There will be a need for cheap entertainment and Nintendo can easily fill that gap. Plus, its family friendly profile offers greater flexibility in terms of an addressable market.
Finally, the company benefits from solid financials. In particular, its balance sheet suffers no debt, meaning that Nintendo can weather serious storms. Also, it’s consistently profitable, commanding a superior net margin of 28.2%. Thus, it should be on your radar.
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.