In this piece, we will take a look at 12 undervalued blue chip stocks to buy according to Wall Street analysts. If you want to skip our introduction to blue chip stocks, then take a look at 5 Undervalued Blue Chip Stocks To Buy According to Wall Street Analysts.
The stock market is made up of thousands of companies. Out of these, a mere handful manages to catch public attention due to a variety of factors. These firms can either be popular household names, such as Apple Inc. (NASDAQ:AAPL), firms that have created new industries like Intel Corporation (NASDAQ:INTC), or companies that bring in billions of dollars in revenue and are known for their financial stability and strength.
Firms at the top of the stock market food chain are often referred to as Blue Chip stocks. The term ‘Blue Chip’ is more than a century old, and as you might have guessed, it comes from poker where players assign a monetary value to chips and then gamble on them with cards. A blue chip stock in the 1920s would typically have a share price greater than $200 and the term was coined by a reporter for Dow Jones. These days, there are no fixed criteria to define a firm as a blue chip, however, the typical classification normally includes the 30 stocks included in the Dow 30 index.
Investing in blue chip stocks typically offers a variety of benefits that one might be unable to accrue when investing in other stocks such as penny stocks or small cap stocks. These firms are typically quite resilient to significant share price drops due to their size and stability, and their popularity also provides the market with plenty of liquidity. Not to mention, several blue chip stocks also pay dividends. We took a closer look at blue chip firms with large market capitalization and stable dividend growth as part of our 12 Best Blue Chip Dividend Stocks To Buy coverage and determined that the top dividend paying stocks are Exxon Mobil Corporation (NYSE:XOM), The Coca-Cola Company (NYSE:KO), and 3M Company (NYSE:MMM).
August is an important month for the stock market as it will see several large firms report their earnings for the second quarter of 2023. These earnings come at a time when high interest rates take their toll on corporate spending, but lowering inflation provides consumers with more leeway to make expensive purchases. To add to this, the earnings also provide important hints about the current state of the U.S. economy, to enable analysts and economists to determine whether a recession might materialize just when everybody starts looking the other way.
One blue chip stock that reported its earnings in August is Apple. The largest technology company in the world saw its quarterly revenue drop for its third quarter of fiscal year 2023, and the revenue for the first three quarters also fell. However, Apple still beat analyst EPS estimates due to lower costs in administrative and other expenses. Another blue chip firm and one whose sales are closely watched to measure consumer spending power is Coca-Cola. It is the largest beverage company in the world and one that had a strong second quarter as it managed to beat analyst EPS estimates by a wide margin. Coca-Cola reported $12 billion in net revenues for the quarter, which marked a 6% annual growth. The results indicated that consumers continued to spend despite high inflation, and the revenue growth also enabled Coca-Cola to report a 34% GAAP EPS growth.
However, for the beverages company, the biggest takeaway from its second quarter of 2023 earnings was not the revenue or the EPS figures. Instead, it was Coca-Cola’s guidance, as the company upgraded its non-GAAP revenue guidance to predict an 8% to 9% organic growth for the full year 2023. Corporate guidance is a crucial factor in an earnings season like the one we’re currently in the middle of. This is because firms have a real time view of their operations which leaves them in a better position to predict future outcomes. These outcomes, when put together, can also provide the tea leaves to make a prediction of the broader economic performance.
Joining Coca-Cola as an important company whose earnings guidance and financial performance are also an economic barometer is Walmart Inc. (NYSE:WMT). The retailer has direct contact with consumers due to its business model, and while it has not reported its latest earnings, investment bank Credit Suisse has some good news for the stock as it has increased Walmart’s share price target to $180 from $170. Credit Suisse believes that Walmart is positioned well to handle any volatility in consumer spending as its entire approach is based on providing customers with value.
With this context, let’s take a look at the most undervalued blue chip stocks according to Wall Street. The stocks leading the pack are The Walt Disney Company (NYSE:DIS), Verizon Communications Inc. (NYSE:VZ), and Microsoft Corporation (NASDAQ:MSFT).
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Our Methodology
To compile our list of the most undervalued blue chip stocks according to analysts, we calculated the share price upside for blue chip companies based on their average share price target data from Yahoo Finance. The blue chip stocks with the highest share price upside are part of our list of the undervalued blue chip stocks to buy according to analysts. The firms chosen are part of the Dow 30 index.
12 Undervalued Blue Chip Stocks To Buy According to Wall Street Analysts
12. McDonald’s Corporation (NYSE:MCD)
Share Price Upside: 14%
McDonald’s Corporation (NYSE:MCD) really needs no introduction. A household name, it is one of the largest food retailers in the world. RBC Capital, BMO Capital, and Baird reiterated Outperform ratings for the shares in July, and the average share price target is $329.24.
During Q1 2023, 64 of the 943 hedge funds surveyed by Insider Monkey had held McDonald’s Corporation (NYSE:MCD)’s shares. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest shareholder among these since it owns a $459 million stake.
Along with The Verizon Communications Inc. (NYSE:VZ), Walt Disney Company (NYSE:DIS), and Microsoft Corporation (NASDAQ:MSFT), McDonald’s Corporation (NYSE:MCD) is an undervalued blue chip stock seeing favor among hedge funds.
11. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Share Price Upside: 15%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an American pharmaceutical retailer headquartered in Deerfield, Illinois. The firm missed its second quarter analyst EPS estimates, and the average share rating is Hold.
Insider Monkey dug through 943 hedge fund portfolios for this year’s first quarter and found out that 39 had bought a stake in the company. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s biggest investor out of these is Stephen Dubois’ Camber Capital Management with a $224 million investment.
10. The Coca-Cola Company (NYSE:KO)
Share Price Upside: 15%
The Coca-Cola Company (NYSE:KO) is the largest beverage company in the world. It raised full year revenue guidance during its second quarter earnings results and the stock is rated Buy on average.
As of March 2023, 61 of the 943 hedge funds part of Insider Monkey’s database had held The Coca-Cola Company (NYSE:KO)’s shares. Warren Buffett’s Berkshire Hathaway is the largest stakeholder since it owns $24.8 billion worth of shares.
9. Chevron Corporation (NYSE:CVX)
Share Price Upside: 15%
Chevron Corporation (NYSE:CVX) is one of the largest oil companies in the world. Like other oil majors, its profits fell in Q2 2023, but the firm beat analyst EPS estimates. The shares have an average rating of Buy and an average share price target of $185.64.
By the end of 2023’s first quarter, 64 of the 943 hedge funds polled by Insider Monkey had invested in the company. Chevron Corporation (NYSE:CVX)’s largest shareholder is Warren Buffett’s Berkshire Hathaway with a stake worth $21.6 billion.
8. The Travelers Companies, Inc. (NYSE:TRV)
Share Price Upside: 16%
The Travelers Companies, Inc. (NYSE:TRV) is an insurance company that is one of the oldest on our list since it was set up in 1853. The firm missed analyst EPS estimates by a wide margin for its Q2 earnings and the stock is rated Buy on average but teetering towards Hold.
Insider Monkey’s first quarter of 2023 survey covering 943 hedge funds revealed that 45 had bought The Travelers Companies, Inc. (NYSE:TRV)’s shares. Cliff Asness’ AQR Capital Management is the biggest investor among these since it owns 756,481 shares that are worth $129 million.
7. Salesforce, Inc. (NYSE:CRM)
Share Price Upside: 16%
Salesforce, Inc. (NYSE:CRM) is a software company that provides businesses with a platform to manage their customer relations. Despite a corporate slowdown, it beat analyst EPS estimates during the second quarter, and the shares are rated Outperform by several firms such as BMO Capital and RBC Capital.
During this year’s March quarter, 136 out of the 943 hedge funds part of Insider Monkey’s database had held a stake in the company. Salesforce, Inc. (NYSE:CRM)’s largest hedge fund shareholder is Ken Fisher’s Fisher Asset Management through a $2.8 billion stake.
6. NIKE, Inc. (NYSE:NKE)
Share Price Upside: 16%
NIKE, Inc. (NYSE:NKE) is another household brand name. Its products are so valuable that the firm’s warehouses are often raided by criminals looking to sell them on the black market. NIKE, Inc. (NYSE:NKE) missed analyst Q2 2023 EPS estimates but its shares are still rated Buy on average.
81 of the 943 hedge funds surveyed by Insider Monkey for their Q1 2023 shareholdings had bought NIKE, Inc. (NYSE:NKE)’s shares. Ken Fisher’s Fisher Asset Management is the biggest hedge fund investor in this list, courtesy of a $1.1 billion investment.
The Walt Disney Company (NYSE:DIS), NIKE, Inc. (NYSE:NKE), Verizon Communications Inc. (NYSE:VZ), and Microsoft Corporation (NASDAQ:MSFT) are some undervalued blue chip stocks to buy according to hedge funds.
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Disclosure: None. 12 Undervalued Blue Chip Stocks To Buy According to Wall Street Analysts is originally published on Insider Monkey.