Long-term investing is possibly among the most boring things. After identifying a quality stock, it’s a matter of holding with patience. On the other hand, investing in penny and meme stocks is exciting and attracts investors. There is a high degree of speculation and quick returns are tempting. Of course, it makes sense to allocate a small portion of the portfolio to penny and meme stocks. However, sustained value can only be created by exposure to undervalued blue-chip stocks.

The whole idea of value investing is to wait for the right opportunity. Even the best blue-chip stocks go through phases of price or time correction. That’s the right time to grab these stocks and hold them for the next few years. A meaningful rally from a valuation gap generally translates into the stock outperforming the index.

I, therefore, believe the undervalued blue-chip stocks discussed will likely outperform the index over the next three to five years.

Lockheed Martin (LMT)

Global defense spending touched record highs of $2.44 trillion last year. It’s likely that defense spending will continue to swell with rising geopolitical tensions globally. Defense stocks are, therefore, attractive for the long term, and Lockheed Martin (NYSE:LMT) is worth considering. In the last 12 months, LMT stock has remained sideways. I expect a breakout rally after an extended period of consolidation for this 2.74% dividend yield stock.

For Q1 2024, Lockheed reported a robust order backlog of $159 billion. This provides clear revenue and cash flow visibility. The defense company has guided for free cash flow of $6.2 billion for the year. Value creation will continue through dividends and share repurchases.

At the same time, Lockheed is investing in next-generation defense technology. That will support upside in orders booked in the coming years. Some of the areas of research and development include hypersonic, next-generation interceptor, spectrum dominance and directed energy.

Chevron (CVX)

Chevron (NYSE:CVX) is another stock that has remained sideways in the last 12 months. At a forward P/E of 12, CVX stock looks attractive and offers a dividend yield of 4.25%.

The reason for the oil & gas stock remaining subdued is macroeconomic headwinds that have translated into weakness in oil prices. However, with expansionary monetary policies likely, I am bullish on oil trending higher. This is a near-term catalyst for CVX stock.

I must add that Chevron is a blue chip worth holding in the core portfolio. The company has an investment-grade balance sheet and quality oil & gas assets. Further, the asset portfolio has an attractive break-even that translated into healthy cash flows.

To put things into perspective, Chevron reported operating cash flow of $6.8 billion for Q1 2024. Even with subdued oil prices, the annual OCF visibility is $28 billion. If oil trades at $100 per barrel, OCF will likely be more than $40 billion. The completion of its Hess (NYSE:HES) acquisition will also support cash flow upside.

Pfizer (PFE)

Pfizer (NYSE:PFE) stock looks attractive and undervalued after a significant correction. My view is underscored by the point that PFE stock trades at a forward P/E of 11.8. Further, the biopharmaceutical stock offers a robust dividend yield of 6.13%.

It’s important to understand the reason for the correction in PFE stock. First, growth has decelerated on the back of lower COVID-19 vaccine sales. Further, Pfizer has been impacted by drugs going off-patent.

However, the biopharma major has a deep pipeline of drug candidates. Currently, 113 products are in the pipeline, with 37 in phase three. As new drugs are commercialized, there is visibility for growth.

I must add that Pfizer has pursued acquisitions to boost its growth visibility. In December, the company completed the acquisition of Seagen for a consideration of $43 billion. The acquisition provides significant diversification in the oncology business. Therefore, there are multiple catalysts for growth, and PFE stock is likely to be a value creator from current levels.

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.