Talking heads warn a recession is imminent in America. The majority of these people appear to either have academic backgrounds or be economists who advise large banks without actually making trading decisions themselves. But many of the country’s most successful investors — including multi-billionaires George Soros, Ken Griffin, Steve Cohen, and Warren Buffett — have been buying a high number of stocks in the last year. I’ve bet my money on the actions of the latter group, rather than the statements of the former individuals. And I advise you to do the same. In fact, one of the best ways for more conservative investors to get exposure to the market is by buying undervalued blue-chip stocks.
As a result, I’ve selected seven well-positioned, undervalued blue-chip stocks for conservative investors to buy now.
a bull next to a stack of blue gambling chips to represent blue-chip stocks
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As I reported in Feb. Restaurant Brands (NYSE:QSR), the owner of Burger King and Popeye’s Chicken, hired fast-food management all-star, Patrick Doyle, as its executive chairman late last year. Doyle helped Domino’s Pizza (NYSE:DPZ) attain stellar results during his eight years as its CEO.
Meanwhile, the Street appears to be turning upbeat on QSR stock, with investment bank Cowen raising its rating on QSR to “outperform” from “market perform.” KeyBanc also upgraded the QSR stock to “overweight” from “sector weight.” Cowen expects QSR to turn Burger King around, and it estimates that the chain’s same-store sales jumped 8% year-over-year last quarter. The bank expects Burger King’s SSS to climb 4.5% YOY this quarter, and it raised its price target on the shares to $75 from $72.
KeyBanc believes that the margins of QSR’s franchises have improved since Doyle arrived at the company, and the firm is upbeat on the company’s growth strategy. KeyBanc thinks that the stock’s risk-reward ratio is “compelling” and placed a $76 price target on the shares. QSR has a forward price-earnings ratio of just 16, versus 27 for its largest competitor, McDonald’s. (NYSE:MCD).
Micron (MU)
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Computer flash-memory maker Micron (NASDAQ:MU) jumped on news Samsung would cut its “production of memory chips by a meaningful level.”
On that news, analysts at Citi responded with a note predicting that the production cut by Samsung would ignite a recovery of Micron’s key “dynamic random access memory (DRAM) market.” Reporting that Samsung’s products currently account for 50% of all DRAM chips, Citi is now predicting that the sector will rebound in the second half of 2023. Better, according to the firm, the demand for DRAM chips from data centers and smartphone makers will “both stabilize” in the second half, while the DRAM demand of PC makers already “appears to have stabilized.”
Even before Samsung’s news, MU was bullish on its own outlook. Specifically, on March 28, CEO Sanjay Mehrotra expressed bullishness on the “long-term demand” for the company’s products and said he anticipated “gradual improvements to the industry’s supply-demand balance.” Micron also stated that the demand for its offerings from data center had “bottomed,” while its PC and gaming markets would follow suit later in 2023.
AGCO (AGCO)
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A maker of farm equipment and other products used by farmers, AGCO (NYSE:AGCO) is well-positioned to benefit from continued high food prices and farmers’ resulting, elevated income. In the fourth quarter of last year, AGCO’s top line soared 24% versus the same period a year earlier to $3.9 billion, while its earnings per share, excluding some items, came in at $4.47, way up from $3.08 during the same period a year earlier. Both its top and bottom lines set all-time records in Q4.
“Our performance was fueled by robust demand for our industry-leading products coupled with continued solid global industry demand,” said CEO Eric Hansotia. “For 2023, we expect continued sales growth and margin expansion as industry demand remains strong and our farmer-first strategy continues to gain traction.” AGCO stock has a very attractive forward price-earnings ratio of just 8.8.
Greenbrier (GBX)
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Railcar maker Greenbrier (NYSE:GBX) reported outstanding fiscal second-quarter results. The company’s revenue jumped to $1.1 billion from $766.5 million during the previous quarter, while its EBITDA, excluding certain items, increased to $98 million from $48.7 millon. The increase in its adjusted EBITDA was driven by “higher volume across all operating units, the company reported. Finally, its adjusted earnings per share jumped to 99 cents from 5 cents, and its railcar backlog stood at an impressive $3.1 billion at the end of Feb.
NXP Semiconductors (NXPI)
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NXP Semiconductors (NASDAQ:NXPI) is well-positioned to benefit from the continuously, rapidly increasing use of chips by automakers, industrial companies and firms that make products connected to the Internet. That’s because a majority of NXP’s revenues are derived from those two sources. In fact, in 2022, $9.5 billion of its $13.1 billion of total sales were derived from automotive or industrial and Internet of Things sources.
Meanwhile, since NXPI also sells chips for PCs and handsets, it should benefit from the bottoming of those sectors, as predicted by Citi (Please see the section on MU in this column for more information on Citi’s call). NXPI stock trades at a very low forward price-earnings ratio of just 13.6.
Wells Fargo (WFC)
10 Small-Cap Stocks to Buy Before They Grow Up
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As a “too-big-to-fail” bank, Wells Fargo (NYSE:WFC) should benefit from deposit inflows from small banks amid fears that such institutions could fail. Further, Wells should benefit from favorable net interest margins. That’s because interest rates remain elevated, but the bank should not have to raise the rates it pays for its deposits much due to its “too-big-to-fail” status.
Meanwhile, on April 6, investment bank Raymond Jamesraised its rating on Wells to “strong buy” from “outperform.” Like me, the firm expects Wells to benefit from last month’s banking mini-crisis, and it believes that Wells may also get a lift from the removal of punishments that Washington had leveled against it due to its past scandals. Raymond James trimmed its price target on Wells to $47 from $52, but its price target remains well below the shares’ current price. Further, I also expect the bank’s credit and debit card businesses to benefit from better-than-expected consumer spending trends going forward as labor trends remain strong. WFC stock has a very low forward price-earnings ratio of eight.
Stellantis (STLA)
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Among the catalysts of little-discussed, Europe-based Stellantis (NYSE:STLA) which owns Chrysler and Fiat are its strong financial results, the electrification of its popular Ram brand in the U.S., and the rebound of European auto sales. Despite Europe’s well-known problems and the auto sector’s supply-chain issues, Stellantis’ net profit jumped 26% last year to 16.8 billion euros, while its top line climbed 18% to nearly 180 billion euros.
Moreover, in 2022, Stellantis reports that it was number one in selling EVs to companies in the EU and number two in EV sales overall in the bloc, while it was the leader in the U.S. in plug-in hybrid EV sales. Indeed, the plug-in hybrid versions of the Jeep Wrangler and the Jeep Grand Cherokee have proven to be very popular in the U.S. The success of the Jeep’s plug–in hybrids bodes well for the outlook of its first U.S. all-electric vehicle, the Ram ProMaster, which is slated to go on sale later this year.
STLA stock has an extremely low forward price-earnings ratio of 3.6.
On the date of publication, Larry Ramer 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.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
