In this article, we will discuss the 10 Cheap Blue Chip Stocks to Buy According to Hedge Funds.
The broad-based market anxiety increased as the US policy uncertainty rose, says Fidelity. The financial markets were weighed down by tariff hikes, deregulation, and tighter immigration policies. The global business cycle is now less synchronized. As per the investment management firm, the US seemed to show mid- and late-cycle dynamics in Q1 2025. Furthermore, the diversification across fixed income and non-US assets is of utmost importance amid growth risks. While the gold and commodities gained, the US dollar decline fueled the non-US equities, says Fidelity.
Amidst US Policy Uncertainty, Diversification Remains Critical
As per Fidelity, the uncertainty regarding the direction of US policy impacted the financial markets during Q1, with investors digesting the news related to executive actions, such as tariff increases, deregulation announcements, reduced government staffing and programs, and tougher immigration activities. Also, the worries related to the economic effects of the tariff increases on the global economy saw an increase during the days after the quarter closed. Despite elevated growth risks, the global expansion was intact as of the close of Q1. Fidelity opines that diversification in fixed income assets and non-US assets is essential.
As per the investment manager, the S&P 500 Index delivered a return of −4.3% for Q1 2025, partly because of the performance of growth stocks (−10%). On the other hand, gold (+19%) and commodities (+8.9%) saw robust gains amid higher market uncertainty.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Investors’ Approach Amidst Fluctuating Economic Indicators
According to Fidelity, the consumer inflation remained rangebound at ~3% during Q1, which was well above the 2% target of the US Fed. The firm anticipates sticky inflation around 3% for the next year, with upside risk resulting from tariff increases. As per the firm, the consumer inflation expectations have increased to multi-decade highs, making it simpler for businesses to pass the increased costs. Coming to the labor, it has remained tight so far, despite increased policy uncertainty, government layoffs, and federal funding cuts, says Fidelity. On the supply side, the broader labor force participation has stalled below the pre-pandemic rate due to slowing immigration as well as demographic constraints.
As per Marci McGregor, Head of Portfolio Strategy (Chief Investment Office), Merrill and Bank of America Private Bank, the next few months can be a good time to play defense. The investors can consider defensive, dividend-paying, and value-oriented stocks. For the long term, the investors can position themselves for when the uncertainty around trade decreases. The volatility can provide a chance to buy assets supporting the long-term strategy at attractive prices, says McGregor.
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Our Methodology
To list the 10 Cheap Blue Chip Stocks to Buy According to Hedge Funds, we scanned the holdings of the iShares Core S&P 500 ETF and chose companies that trade at a forward P/E of less than ~20.0x. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiments.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Cheap Blue Chip Stocks to Buy According to Hedge Funds
10. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 64
Forward P/E as of April 18: ~13.2x
Morgan Stanley (NYSE:MS) is a financial holding company that is engaged in providing various financial products and services to governments, financial institutions, and individuals. The company’s diverse business model, spanning investment banking, trading, wealth management, and investment management, positions it well to reap the benefits of improved market conditions. As and when economic conditions strengthen, Morgan Stanley (NYSE:MS) can see increased activity throughout segments.
While an expected rebound in M&A and IPO activities can fuel strong revenue growth in its investment banking division, the improved market conditions can result in higher trading volumes. Therefore, this diversification enables Morgan Stanley (NYSE:MS) to benefit from various aspects of market improvement. In Q1 2025, the integrated firm managed to deliver a very strong quarter with record net revenues of $17.7 billion and EPS of $2.60.
The Institutional Securities’ strong performance was aided by its Markets business, with Equity posting a record $4.1 billion in revenues. Also, total client assets of $7.7 trillion throughout Wealth and Investment Management were aided by $94 billion in net new assets. Morgan Stanley (NYSE:MS)’s results exhibit consistent execution of its clear strategy to fuel durable growth across its global footprint. Nightview Capital, an investment management company that concentrates exclusively on publicly traded equity strategies, published its Q4 2024 investor letter. Here is what the fund said:
“Finance is transforming. Technology is democratizing access, reshaping wealth management, and enabling entirely new models of investing. From algorithmic trading to digital-first advisory platforms, the sector is evolving rapidly. Investors demand smarter, more sustainable options. The potential is significant, and we are focused on companies shaping how people save, invest, and transact in the years to come.
Morgan Stanley (NYSE:MS): Core Opportunity: Morgan Stanley’s diversified business model supports robust growth across investment banking, wealth management, and investment management.
Key Highlights: Investment Banking Momentum: Revenues rose 55% YoY in Q3 to $1.5 billion, driven by market recovery and large public offerings.
Wealth Management Leadership: Record revenues of $7.2 billion, with total fee-based assets reaching $2.3 trillion.
AI Integration: Cutting-edge partnerships enhance advisor productivity and deepen client relationships.
Investment Case: Morgan Stanley offers a compelling blend of growth and resilience, with strong revenue diversification and a dominant wealth management franchise. Its forward P/E of ~14x suggests attractive valuation upside.”
9. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 71
Forward P/E as of April 18: ~16.4x
American Express Company (NYSE:AXP) operates as an integrated payments company. BofA upped the company’s price target to $275 from $274, keeping a “Buy” rating. The firm views its Q1 report as positive. The firm lauded the management’s confidence in the outlook amidst the fluid macro backdrop. American Express Company (NYSE:AXP)’s management plans to focus on managing the company for the long term, exercising disciplined expense management, and making strategic investments in the business.
Elsewhere, William Blair analyst Christopher Kennedy reiterated its bullish stance on American Express Company (NYSE:AXP)’s stock, giving a “Buy” rating. This analyst’s rating is backed by a combination of factors demonstrating the company’s strong financial positioning and growth potential. The analyst opines that American Express Company (NYSE:AXP)’s strategic emphasis on premium consumers, together with its strong underwriting standards and revenue model, places it well to withstand economic challenges. Furthermore, the company demonstrated resilience with stable billed business growth as well as a robust performance in the travel and entertainment sectors, says Kennedy.
Bretton Capital Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“American Express Company (NYSE:AXP) was our best performing stock last year, returning 60%, which was on top of 2023’s 29%. Its premium credit cards are more popular than ever, and its moderately affluent customer base continues to spend. American Express did especially well signing up younger cardholders, a great sign that its growth can be sustained for years to come. The combination of healthy revenue growth and tight expense control led to an earnings-per-share growth of 25%.”
8. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 74
Forward P/E as of April 18: ~9.1x
Verizon Communications Inc. (NYSE:VZ) is engaged in providing communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities. Evercore ISI analyst Vijay Jayant upped the company’s stock from “In Line” to “Outperform,” while raising its price target to $48 from $44. The company’s management remains recognized for the effective execution when it comes to improving the postpaid subscriber trends in the Consumer segment, gaining momentum in the Business wireless customers, and meeting the broadband subscriber targets.
As per the analyst, the market is not fully appreciating Verizon Communications Inc. (NYSE:VZ)’s resilient wireless service revenue growth outlook, efforts related to the fiber expansion, and the potential strategic and financial benefits due to the Frontier acquisition. Overall, the analyst believes that wireless companies can continue to perform well, considering the current market uncertainty and downside risks. Verizon Communications Inc. (NYSE:VZ) continues to make investments in lucrative fields, including Internet of Things (IoT) partnerships, 5G infrastructure, and fiber expansion. Third Point Management, a New York-based investment advisor, published its Q3 2024 investor letter. Here is what the fund said:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”