The 7 Best Blue-Chip Stocks to Buy for 2023

  • These are the best blue-chip stocks to buy for 2023 at attractive forward valuations.
  • Chevron Corporation (CVX): A strong balance sheet with cash flow upside potential.
  • Barrick Gold (GOLD): Positioned to benefit as gold trends higher.
  • Apple (AAPL): Diversified revenue with a focus on innovation and new product lines.
  • Astra Zeneca (AZN): A strong pipeline of drugs and healthy revenue growth guidance.
  • JPMorgan Chase (JPM): Net interest income upside is likely to sustain.
  • Costco Wholesale (COST): Healthy comparable store sales growth and upside in recurring income.
  • British American Tobacco (BTI): Healthy growth in the new non-combustible segment.
Best Blue-Chip Stocks - The 7 Best Blue-Chip Stocks to Buy for 2023

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The important of holding some of the best blue-chip stocks can be explained by how the markets have reacted in the last 12 months. During this period, the S&P 500 Growth Index has declined by 20.4%, while the overall S&P 500 has declined by 9.2%. Of course, several high-flying growth stocks have corrected by more than 50%. It’s blue-chip stocks that offer protection to the portfolio in challenging times.

The current year is likely to be challenging for equities with headwinds related to global growth. However, stock selection remains the key, and several growth and blue-chip stocks will outperform. While buying undervalued growth plays, I prefer to remain overweight on some of the best blue-chip shares.

Another interesting point to note is the Vanguard S&P 500 ETF (NYSEARCA:VOO) has delivered annualized returns of 12.52% in the last 10 years. During the same period, the Vanguard Growth ETF (NYSEARCA:VUG) has returned 12.8% in the past decade on an annual basis. The strong performance of blue-chip stocks is likely to sustain considering attractive valuations and a healthy dividend yield.

Let’s discuss seven of the best blue-chip stocks to buy for 2023.

Best Blue-Chip Stocks: Chevron Corporation (CVX)

Chevron (CVX) logo on gas station sign with "diesel" and "food mart" written underneath
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Chevron Corporation (NYSE:CVX) is among the best blue-chip stocks to buy for 2023. Besides the potential for capital gains, CVX stock also offers an attractive dividend yield of 3.1%.

Even with recession fears, Brent oil still trades at more than $80 per barrel. It’s unlikely oil will witness further correction from these levels. Chevron is positioned to deliver robust cash flows through the year.

To put things into perspective, Chevron reported operating cash flow of $13.7 billion for the third quarter of 2022. The company’s annualized operating cash flow (OCF) potential is in excess of $40 billion.

Even with some big capital investments planned ($15 to $17 billion annually), Chevron is positioned to report robust free cash flows. This leaves ample headroom for dividend growth and continued share repurchase.

With high financial flexibility, Chevron is positioned to make big investments on a sustained basis. The company is also accelerating investments in low carbon business. Cash flows are therefore likely to swell further in the next few years.

Barrick Gold (GOLD)

An image of multiple gold bars
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Gold has witnessed a sharp rally in the recent past with inflation cooling on a relative basis. The precious metal trades above $1,900 per ounce, which has also sparked a rally among gold mining stocks. With recession fears in 2023 and the likelihood of the dollar weakening further, gold is an attractive investment theme.

Barrick Gold (NYSE:GOLD) stock is a quality name to consider at current levels. The stock offers a dividend yield of 2.1% and trades at an attractive forward price-to-earnings (P/E) ratio of 25 times.

With a higher realized gold price, cash flows will swell, which will translate into stock upside and dividend growth. For the first nine months of 2022, Barrick reported operating cash flow of $2.7 billion. This was at a lower realized gold price.

I expect OCF to be in excess of $4 billion for 2023. The company will therefore be positioned to increase dividends and ramp-up investments. This will ensure that reserve replacement remains robust. With an investment-grade balance sheet, Barrick Gold is also positioned for potential acquisitions.

Best Blue-Chip Stocks: Apple (AAPL)

Apple logo on a pink and purple background. AAPL stock.
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Last year was challenging for technology stocks, with valuations adjusting on the downside. Some of the best blue-chip stocks from the technology space however seem to be trading at attractive valuations.

Apple (NASDAQ:AAPL) is one stock to buy at a forward price-earnings ratio of 22.1 times. While AAPL stock offers a low dividend yield of 0.7%, it’s among the top dividend growth stocks to consider.

Coming to the business, the iPhone segment remains the cash cow for the company. Apple has however witnessed healthy growth from the wearable and services segment. It was also reported recently that Apple is working on smart home products. As the company continues to diversify, there is ample headroom for growth.

Talking about diversification, it’s also being rumored that Apple’s electric vehicle will be launched in 2026. The car is likely to have an initial price of less than $100,000. With a strong balance sheet and focus on innovation, Apple remains attractive.

Astra Zeneca (AZN)

Exterior of the AstraZeneca's manufacturing facility at Snackviken
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Among pharmaceutical stocks, Astra Zeneca (NASDAQ:AZN) looks attractive at a forward P/E ratio of 14 times. The stock also offers a dividend yield of 4.2%.

It’s worth noting AZN stock has outperformed Pfizer (NYSE:PFE) stock in the last 12 months. With potential blockbuster drugs in the pipeline, I expect this outperformance to sustain.

To put things into perspective, Astra Zeneca has a pipeline of 179 projects. This is diversified across oncology, biopharmaceuticals and rare diseases. As products are launched, revenue growth will be supported.

Astra Zeneca has already been on a robust growth trajectory. For the first nine months of 2022, the company reported revenue growth of 37%. During this period, operating cash flows have also continued to swell. The company has guided for low double-digit revenue growth through 2025.

With strong financial flexibility, Astra Zeneca will be positioned to invest increasingly in research and development. At the same time, acquisitions will boost growth. Recently, Astra Zeneca closed the acquisition of Neogene Therapeutics, which is a clinical-stage biotechnology company.

Best Blue-Chip Stocks: JPMorgan Chase (JPM)

A sign for JP Morgan Chase & Co (JPM).
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Over a 12-month period, JPMorgan Chase (NYSE:JPM) stock returns are still negative. However, JPM stock has trended higher by nearly 19% in the last six months. The 2.9% dividend yield means the shares remain attractive at a forward P/E ratio of 10.4 times.

There are two important reasons to be bullish on JPM stock for 2023. First, with rising interest rates, the bank has seen growth in net interest income (NII) and NII margin. This growth is likely to sustain, and as the core business performs, the stock is likely to trend higher.

Further, there are fears of a slowdown or recession in 2023. With the U.S. being a consumption-based economy, the focus of policymakers will be to boost spending. This is likely to translate into credit growth.

JPMorgan Chase also remain attractive from a balance sheet perspective. The investment banking and wealth management business is likely to be impacted on a relative basis. However, that’s likely to be offset by strong growth in core banking income.

Costco Wholesale (COST)

A Costco Wholesale (COST) warehouse in Auburn Hills, Michigan.
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It’s been a challenging environment for retail stocks with inflation being a major concern. However, Costco Wholesale (NASDAQ:COST) stock has remained sideways over a 12-month period. With healthy growth and attractive dividends, I expect a breakout from current levels of $490.

For Q1 2023, Costco reported healthy sales growth of 8.1% to $53.44 billion. For the same period, the company’s comparable store sales growth was 7.1%. Backed by strong growth metrics, the company recently announced a reauthorized $4 billion buyback program. I expect value creation to sustain through dividends and repurchase.

An important point to note is Costco has 120.9 million cardholders with a 92.5% renewal rate in U.S. and Canada. This has translated into $4.3 billion in membership fees in the last 12 months. As Costco expands in the U.S. and internationally, membership fee will continue to swell. Strong recurring income is a key positive when it comes to sustaining healthy cash flows.

Best Blue-Chip Stocks: British American Tobacco (BTI)

British American Tobacco logo on a building
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British American Tobacco (NYSE:BTI) is a significantly undervalued blue-chip stock that offers an attractive dividend yield of 5.6%. At a forward P/E ratio of 7.8 times, the stock seems poised for a meaningful rally in the coming quarters.

One reason to like British American is an accelerated move toward non-combustible products. As of June 2019, the company had 8.9 million consumers of its non-combustible product. This had swelled to 20.4 million by June 2022. Further, as of the first half of 2022, the revenue contribution from this segment was 14.6%. British American expects the non-combustible segment to be profitable by 2025.

At the same time, the company’s core business continues to deliver positive free cash flows. This will ensure sustained dividends. The free cash flow from the combustible segment will also be used to accelerate investments in the new business. The outlook therefore remains positive for British American.

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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


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