7 Blue-Chip Stocks to Protect Your Wealth as the Economy Slows


  • Lockheed Martin (LMT): A strong order backlog of $159 billion will ensure robust cash flows for dividends and share repurchases.
  • Newmont (NEM): With gold trending higher, Newmont is well-positioned to benefit in the form of higher realized prices and cash flows.
  • Chevron (CVX): CVX has an investment-grade balance sheet with high operating cash flow potential for dividends and capital investments.
  • Keep reading to discover more blue-ship stocks to buy!
blue-chip stocks to buy - 7 Blue-Chip Stocks to Protect Your Wealth as the Economy Slows

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For Q1 2024, GDP growth in the United States decelerated to 1.6% from 3.4% in the last quarter. There is no doubt that factors like high interest rates and geopolitical tensions have impacted growth. At the same time, inflation has been relatively stubborn, and potential rate cuts will likely be delayed. The markets are, therefore, likely to witness some nervousness. From an investment perspective, it’s a good idea to look at blue-chip stocks to buy with a low beta.

I must mention here that rate cuts are inevitable. However, a delay will likely translate into some correction for the broad markets. I would use any sharp decline as an opportunity to accumulate growth stocks. For now, the focus should be on blue-chip stocks for capital preservation.

Also, if the blue-chip stocks are undervalued, total returns can be healthy from these ideas in the next 24 to 36 months. The focus of this column is on blue-chip stocks to buy that have remained largely sideways in the last 12 months. A breakout seems imminent for these stock ideas.

Lockheed Martin (LMT)

A Lockheed Martin (LMT) Space Systems sign in Sunnyvale, California.
Source: Ken Wolter / Shutterstock.com

Global defense spending has been increasing at a robust pace. Further, the defense sector is immune to economic shocks. Even during the pandemic year, defense spending increased on a year-on-year basis.

Among blue-chip defense stocks, Lockheed Martin (NYSE:LMT) looks attractive. The stock has remained sideways for the last 12 months and offers a dividend yield of 2.7%. Considering industry tailwinds and business developments, I expect LMT stock to break out on the upside. Even if the broad markets correct, the low-beta stock will likely remain resilient.

As of Q1 2024, Lockheed reported an order backlog of $159 billion. I expect order intake to remain robust, ensuring steady top-line growth. Besides growing defense allocation, investment in next-generation defense technology ensures a robust backlog.

It’s worth noting that Lockheed has guided for free cash flow of $6.2 billion for the year. That implies value creation through dividends and share repurchases.

Newmont (NEM)

Silver Stocks to Buy - Newmont Corp (NEM)

Newmont (NYSE:NEM) has started trending higher recently. However, in the last 12 months, NEM stock has had negative returns of 8%. I see this as a golden accumulation opportunity, with gold trading at over $2,350 an ounce. With potential rate cuts due in the coming quarters, I expect a further rally for the precious metal.

Specific to Newmont, an investment grade balance sheet is the first reason to be positive. The company can pursue aggressive capital investments to boost production and benefit from higher realized gold prices.

As of 2023, Newmont reported 128 million ounces of gold reserves and 155 million ounces of resources. A deep tier-one asset base will ensure a positive long-term trend in production and cash flows.

Last year, Newmont reported operating cash flow of $2.8 billion. With a higher realized price, OCF will likely be around $3.5 billion for 2024. Robust cash flows will ensure healthy dividend growth. NEM stock already has an attractive dividend yield of 2.35%.

Chevron (CVX)

Chevron (CVX) sing with "diesel," "food mart" and "car wash" written underneath
Source: Sundry Photography / Shutterstock.com

Chevron (NYSE:CVX) is another quality blue-chip stock that trades at a valuation gap. The 3.99% dividend yield stock has remained sideways in the last 12 months. While slower GDP growth is negative for oil demand, the possibility of rate cuts will trigger a rally in energy prices. I am, therefore, bullish on CVX stock.

There are multiple reasons to like Chevron. First, the company has an investment-grade balance sheet and reported a low net-debt ratio of 8.8% as of Q1 2024. Therefore, there is high financial flexibility to make aggressive capital investments.

Further, even with the relatively depressed oil prices, Chevron reported an operating cash flow of $6.8 billion for Q1. That implies an annualized OCF potential of $27 billion. However, if oil trades in the zone of $90 to $100 per barrel, OCF is likely to be above $35 billion. Chevron will, therefore, be positioned to pursue aggressive buybacks and deliver robust dividend growth.

AstraZeneca (AZN)

Exterior of the AstraZeneca's manufacturing facility at Snackviken
Source: Roland Magnusson / Shutterstock.com

In general, healthcare stocks have been ignored in a post-pandemic world. This is a good opportunity to accumulate quality blue chips trading at a valuation gap. AstraZeneca (NASDAQ:AZN) stock has been sideways in the last 12 months and looks attractive at a forward price-earnings ratio of 18. The low-beta stock also offers a dividend yield of 2.51%.

For Q1 2024, AstraZeneca reported stellar numbers. Revenue increased by 19% on a year-on-year basis to $12.7 billion. Further, earnings per share growth was impressive at 21%.

It’s worth noting that the company has a pipeline of 182 molecular entities. With an attractive late-stage pipeline, robust growth will likely sustain. To put things into perspective, the company had 30 phase three trials last year. Of this, there are 10 potential blockbuster opportunities. The impact will likely be seen on growth in the next 24 to 36 months.

Another positive catalyst for AstraZeneca is its strong geographical presence. In emerging markets, revenue growth for Q1 was 26% on a year-on-year basis. Excluding China, year-on-year growth was 40%.

Rio Tinto (RIO)

Mining cart in a silver, copper, and gold mine representing VOXR Stock.
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Rio Tinto (NYSE:RIO) is a commodity major that looks undervalued and has a low beta. RIO stock has trended higher by 12% in the last 12 months but remains attractive at a forward P/E ratio of 9.5. Considering the valuation, the downside for this 7.34% dividend yield stock is capped. On the other hand, potential rate cuts can be a catalyst for a rally in industrial commodities and will benefit Rio Tinto.

Talking about fundamentals, Rio Tinto has delivered an average annual free cash flow of $10.6 billion in the last five years. Besides attractive shareholder returns, Rio has a strong balance sheet and flexibility to make aggressive growth investments.

This is important since Rio Tinto has been focusing on investing in energy transition metals. That includes the likes of copper, lithium and aluminum — among others. While the iron ore business remains the cash cow, Rio will likely be well diversified in the next five years.

Walmart (WMT)

Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
Source: Jonathan Weiss / Shutterstock.com

An important point to note is that the consumption sector is the primary growth driver for the U.S. economy. Within that sector, retail spending is a key component. Therefore, I would hold quality retail stocks in the portfolio regardless of the economic scenario. Walmart (NYSE:WMT) is a low-beta stock worth holding amidst economic uncertainty.

I must add here that there is a possibility of multiple rate cuts in the next 12 to 18 months. The lower cost of money will boost retail spending, and Walmart will be a beneficiary.

For Q4 2024, Walmart reported healthy revenue growth of 5.7% on a year-on-year basis to $173.4 billion. It’s worth noting that the e-commerce segment revenue increased by 23% globally. Walmart surpassed $100 billion in annual revenue from the e-commerce business. Clearly, the company has built a strong omni-channel presence. Further, Walmart International sales increased by 13.5% in the last financial year. With a presence in big markets like China and India, I expect sales growth to remain robust.

Starbucks (SBUX)

It's Time to Wake Up and Smell the Coffee on Starbucks Stock
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Starbucks (NASDAQ:SBUX) stock has been in a correction mode with a downside of 21% year-to-date. The decline has been triggered by Starbucks’ warning on cautious consumer spending. At the same time, the company lowered its full-year guidance.

However, with the negatives discounted in the stock, it’s a good time to accumulate. SBUX stock offers a dividend yield of 3% and looks attractive at a forward price-earnings ratio of 20.4.

For Q2 2024, Starbucks reported a 2% decline in net revenue on a year-on-year basis to $8.6 billion. Comparable sales declined in U.S. and international markets. However, it’s worth noting that as of Q2, 61% of the company’s stores were concentrated in the U.S. and China.

Starbucks has ample headroom for expansion in other emerging markets in the next 5 to 10 years. The weakness in SBUX stock is an opportunity to gradually accumulate for dividends and steady returns.

On the date of publication, Faisal Humayun did not hold (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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/7-blue-chip-stocks-to-protect-your-wealth-as-the-economy-slows/.

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