So far in 2015, the market has been as mad as a hatter, setting the pulse racing of even the most ardent investor.
Concerns surrounding China’s economy, fettered with heavy equity market losses, have triggered worldwide sell-offs. With financial markets across the globe pressing the panic button, U.S. equities have come under momentous pressure. Moreover, uncertainties shrouding the Fed’s rate hike have kept the investors sweating bullets.
Hence, China and the Fed rate hike are the two big questions looming over the investment space lately. Though we will gain considerable idea about the Fed’s decision after next week’s FOMC meeting, the Chinese dilemma will likely take much longer to unfold.
Taking into consideration such extreme precariousness, it is perhaps high time for investors to turn to the basic rules of investing:
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1"!
Take No Chances
When the stock market is as tumultuous as this, it is only natural for investors to get perplexed about where to invest.
Instead of getting lured by the high-flying small cap companies or falling for the “so-called” growth prospects of some, investors would do better off playing safe at the moment. This is because the inherent volatility that such stocks possess might lead investors to lose money in the greed of making some quick bucks.
Thus, we believe at this moment, investors should do well by seeking refuge in stable, reliable blue chip stocks that are usually in the limelight, given their penchant for steady growth and momentum in price. Additionally, the security of long-term value in the form of solid value metrics (low P/Es) and solid outlooks of such stocks might just prove to be the icing on the cake.
All About Blue Chip Stocks
Blue chips are large, well-known, reputable and financially sound corporations that have been around for a long time. Also, more often than not, they dole out considerable dividends to shareholders and help them earn some extra bucks.
These stocks are less prone to risk since they tend to lose less overall value than a growth stock might in today’s chaotic market conditions. These stocks also have a steady earnings trend. Thus, blue chip companies provide security during phases of sluggish growth backed by their competent management teams and ability to generate consistent profits.
However, it is important to remember that all investing comes with risk. Though these blue chip stocks may not be crash proof and resilient to financial struggles, they are typically more mature, conventional and have more stable trading over the long haul and are thus better positioned to survive the economic downturns.
4 Blue Chip Stocks to Bet On
With the help of our new Style Score System, we have zeroed in on these four blue chip stocks that look promising based on their encouraging Zacks Rank, favorable Value Style Score, market cap of over $50 billion, decent dividend yields and solid outlooks.
Our Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Back-tested results show that stocks with Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential.
Here we present four such stocks for your consideration that are nice options for any portfolio:
AT&T, Inc. T
AT&T provides telecommunications services in the U.S. and internationally. The company operates through two segments, Wireless and Wireline. Recently, AT&T scaled up to the highest position in the U.S. pay-TV market with the acquisition of DIRECTV. In the U.S., the company’s wireless network boasts the nation's strongest LTE signal and the most reliable 4G LTE network. Additionally, AT&T offers the best global wireless coverage.
Value Score: B
Dividend Yield: 5.7%
P/E: 12.44 (versus 16.06 for the industry)
This year’s expected EPS growth rate: 4.96%
Moreover, over the last four quarters, this Zacks Rank #2 (Buy) company has delivered an average positive earnings surprise of 1.99%. Further, analysts have become increasingly bullish on the company over the past two months, leading to a sharp spike of 4.8% in the Zacks Consensus Estimate for 2015 earnings, which now stands at $2.63 per share.
Ford Motor Co. F
Ford is a Zacks Rank #2 company and has been in existence for over a century. Going forward, the positives for Ford include planned product launches, focus on the Asia-Pacific region, global expansion plans, efficient capital deployment, success of the One Ford plan and a solid long-term outlook.
Value Score: A
Dividend Yield: 4.4%
P/E: 8.01 (versus 12.22 for the industry)
This year’s expected EPS growth rate: 46.8%
It is also worth noting that in the last four quarters, the company has delivered an average positive earnings surprise of 17.70%. Additionally, the company’s estimate revisions have been moving north over the past two months, which has resulted in its 2015 Zacks Consensus Estimate for earnings climbing from $1.57 per share to $1.69.
The Home Depot, Inc. HD
The Home Depot is one of the world’s largest home improvement retailers. The company markets and caters to a wide range of clients. It is a hardware retailer that is synonymous with home improvement goods and services in the U.S. This Zacks Rank #2 company is certainly a stable stock worth considering for your portfolio.
Value Score: B
Dividend Yield: 2.1%
P/E: 21.53 (versus 24.36 for the industry)
This year’s expected EPS growth rate: 15.6%
Notably, the company has been topping earnings expectations lately with the last four quarters averaging 3.90%. Moreover, the company has been witnessing upward earnings estimate revisions. Over the past two months, current year estimates have risen from $5.24 per share to $5.29.
UnitedHealth Group Inc. UNH
UnitedHealth Group, carrying a Zacks Rank #2, is a diversified health and well-being company. The company is a top player in the medical sector and has been consistently gaining from strength in its Medicaid and Medicare businesses and improved international performance.
Value Score: A
Dividend Yield: 1.7%
P/E: 18.19 (versus 20.26 for the industry)
This year’s expected EPS growth rate: 11%
Over the last four quarters, the company recorded an average positive earnings surprise of 6.03%. Moreover, the stock has been witnessing positive estimate revisions over the past two months, leading the Zacks Consensus Estimate to climb 1.1% to its present level of $6.33 a share for the current year.
Better Safe than Sorry
Markets so far in 2015 have been rife with fluctuations and what’s coming up next? Well, your guess is as good as mine. This hard-hitting world of investing can take you to the top at one moment, and in the very next, can pull your spirits down.
Thus, considering the current equity market landscape, we suggest shifting your attention toward the above-mentioned blue chip stocks. These stocks are known to have survived quite a few challenges and market cycles and thus may prove to be a better investment at this juncture.
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FORD MOTOR CO (F): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
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