Blue-chip stocks are commanding attention from investors looking for stability and reliability amidst a fluctuating market. Typically, these stock market stalwarts are known for their solid financials, long histories of profitability and consistent records of dividend payments. These factors make them perennial favorites among conservative investors.
The stock market has been volatile of late as investors mull over the possibility of a hard landing. This has led to a decline in stock prices of several companies that have historically traded at high valuations. So, a golden opportunity is presented for investors to buy quality assets at reduced rates.
The resilience of blue-chip companies often makes them safe havens in turbulent times. And, their ability to weather economic downturns can lead to significant gains as markets recover. As we look toward the second half of 2024, discover these three blue-chip stocks. All appear undervalued but may be poised for a rebound, making them attractive buys on the dip.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) stands out not just for its robust market presence but for its strategic positioning in emerging technologies.
The company has demonstrated remarkable resilience and growth over the past fiscal year. MSFT’s stock saw an impressive rally, peaking at around $460 before market corrections linked to broader economic concerns led to a price adjustment. The pullback presents a potential entry point, especially considering the company’s impressive fundamentals.
In its latest Q4 of fiscal year 2024, Microsoft reported revenue of $64.7 billion, marking a 15.2% year-over-year (YOY) increase. This growth is underpinned by significant gains across its diversified portfolio, especially in the Intelligent Cloud segment. The Azure platform, a cornerstone of Microsoft’s cloud strategy, reported a 30% growth, underscoring its dominance and expansion in cloud computing.
And, Microsoft’s commitment to innovation, particularly in artificial intelligence (AI), positions it uniquely in the tech sector. The company has been at the forefront of AI research and application, integrating AI across its product lines, from Azure and Office 365 to Bing and beyond. This strategic focus not only enhances its existing services but also opens new revenue streams and market opportunities.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is a stalwart in the pharmaceutical and healthcare sector. Despite a general downward trajectory in its stock price year-to-date (YTD), the company’s Q2 FY24 results have sparked optimism among investors.
Johnson & Johnson’s quarterly print posted revenue of $22.4 billion, higher than market estimates. This was primarily driven by its Innovative Medicine segment, which dominates the company’s sales.
A significant highlight from the earnings report is the performance of Tremfya, JNJ’s leading treatment in the oncology and immunology segments. With an impressive 30.7% YOY growth, Tremfya is rapidly gaining market traction. It can potentially offset the anticipated declines from Stelara due to patent expirations.
Despite the revised downward EPS guidance for 2024, Johnson & Johnson’s forward non-GAAP P/E ratio of 16x remains below its five-year average of 16.5x. This suggests a potential undervaluation. And, the discrepancy highlights a potential investment opportunity, especially when considering JNJ’s robust dividend yield increase to 3.09%, reinforcing its appeal to dividend-seeking investors.
Visa (V)
Visa (NYSE:V) stands as a colossal figure in the payment processing industry. Known primarily for its vast network of electronic payments, Visa’s strategic operations and financial outcomes continue to attract investors.
Furthermore, Visa’s market position is virtually unrivaled. It processes double the number of transactions compared to its closest competitor, Mastercard. Also, the firm maintains a wide economic moat that is reflective of its pricing power and expansive network effects.
Visa’s financial health remains exceptionally robust, highlighted by its impressive balance sheet and cash flow metrics. The company’s net margins consistently range between 53%-57%. For FY23, Visa reported operating cash flows of $20.8 billion against a GAAP net income of $17.3 billion, highlighting the company’s proficiency in capital management and its ability to generate shareholder value effectively.
Visa’s future growth is expected to be supported by its strategic initiatives aimed at penetrating the burgeoning sectors of e-commerce and digital payments, further facilitated by global trends toward cashless transactions.
On the date of publication, Mohammed Saqib 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.