In this article, we will take a look at the 13 most undervalued blue chip stocks to buy according to analysts.
“Now is the Time to Revisit Portfolios”
The Fed went through with a 50 basis point cut and as things have started to get clear, investors must give their portfolio another look. On September 20, Matt Stucky, Northwestern Mutual Wealth Management’s chief equities portfolio manager, appeared in an interview on Yahoo Finance to discuss why and how investors must revisit their portfolios.
He suggested that now is the perfect time for investors to sit down and reassess their investments with the help of advisors. Stucky highlights that there is currently $6.3 trillion sitting in money market funds in the asset class, which may not be as attractive after the 50 basis point cut went through. He urged investors to consider a rather diversified portfolio and suggested that sitting on cash alone is risky.
He reiterated that while investors do not need to alter their long-term strategic goals, the ones with idle cash must try to allocate or deploy that money in other investment classes. According to Stucky, garnering a solid yield or return on investment does not come without risk and investors must understand that with the current Fed decision on board, it is impossible to get that kind of yield from cash alone.
What Does the Cut Signal?
On September 19, Dennis Lockhart, Former president of the Federal Reserve Bank of Atlanta, appeared in an interview on Yahoo Finance to discuss the aftermath of the rate cut. According to Lockhart, the rate cut was perfectly balanced and rather optimistic in nature.
He believes that the Fed’s decision was not reactionary to anything going on in the market or the economy. The Fed is particularly confident about the inflation rate, the labor market, and the soft landing of the economy.
Lockhart suggested that the Fed will reroute and remain flexible based on how the economy is performing from meeting to meeting. According to him, the Fed will aim to maintain flexibility and the 50 basis point cut was more like a compensation to what should have happened in July.
Now that we have studied the aftermath of the rate cut cycle, let’s take a look at the 13 most undervalued blue chip stocks to buy according to analysts.
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Our Methodology
To come up with the 13 most undervalued blue chip stocks to buy according to analysts we examined multiple similar rankings, our own rankings, and ETFs to come up with the best blue chip stocks. We then chose stocks with a forward P/E ratio that was less than the S&P 500’s (22.68, as of September 22). Finally, we ranked the shortlisted stocks in ascending order of the analyst upside potential, as of September 22, 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
13 Most Undervalued Blue Chip Stocks To Buy According To Analysts
13. Honeywell International Inc. (NASDAQ:HON)
Forward P/E, as of September 22: 20
Analyst Upside Potential, as of September 22: 11%
Number of Hedge Fund Holders: 50
Honeywell International Inc. (NASDAQ:HON) is a leading multinational conglomerate present in multiple industries including aerospace, automation, performance materials and technologies, and safety and productivity solutions.
The company helps organizations solve complex challenges in automation, aviation, and the energy transition for example. Some of its products and services include smart sockets, access controls, actuation systems, air and thermal management systems, fall protection equipment, and first aid supplies to name a few. Over 10 million commercial buildings use Honeywell’s (NASDAQ:HON) technologies to enhance business performance and create more comfortable spaces for employees.
Having stakes in multiple industries does not stop Honeywell International Inc. (NASDAQ:HON) from expanding. In the past few months, the company has not only closed multiple acquisitions in the renewable energy and the air and defense sector, but it has also signed agreements with other tech giants to leverage artificial intelligence and reduce power plant emissions.
Honeywell International Inc. (NASDAQ:HON) is one of the most undervalued blue chip stocks to buy and we say that because of the reliance other companies have on it. The company is set to extremely benefit from the growing demand for automation technologies and AI to enhance workplace productivity and safety.
12. United Parcel Service, Inc. (NYSE:UPS)
Forward P/E, as of September 22: 17.2
Analyst Upside Potential, as of September 22: 12%
Number of Hedge Fund Holders: 44
United Parcel Service, Inc. (NYSE:UPS) is a global shipping and logistics company based in the United States. The company offers freight forwarding services as part of its supply chain solutions segment and offers air freight services as part of its global small package operations segment.
The company reported revenue worth $21.8 billion in the second quarter of 2024. Recently, the company completed the acquisition of Estafeta, a company that provides logistics solutions for consumers in Mexico. Previously, United Parcel Service, Inc. (NYSE:UPS) also signed an air cargo contract with the United States Postal Service (USPS), making UPS the primary air cargo provider to USPS.
The company’s tech prowess is one of its competitive advantages. On the operational front, United Parcel Service, Inc. (NYSE:UPS) has achieved a 26% reduction in staffing so far this year by automating its operational tasks. On the customer front, the company is integrating RFID technology into its vehicles to facilitate the automatic detection of tagged packages.
United Parcel Service’s (NYSE:UPS) strong network and large clientele sets it apart from competitors. The company ships to more than 200 countries, with an average daily volume of 23.3 million packages and documents. The company expects to log $93 billion in revenue for the full fiscal year 2024.
44 hedge funds disclosed having stakes in United Parcel Service, Inc. (NYSE:UPS) at the end of Q2 2024. The total value of these stakes amounted to $1.31 billion. As of June 30, Citadel Investment Group is the largest stockholder in the company and has a stake worth $403.7 million.
Artisan Partners’ Artisan Value Fund stated the following regarding United Parcel Service, Inc. (NYSE:UPS) in its first quarter 2024 investor letter:
“United Parcel Service, Inc. (NYSE:UPS) was a Q4 2023 purchase. When we initiated our position, shares were under pressure due to concerns about its new labor contract diverting volumes and driving up costs, as well as the continued normalization of volumes following COVID-related gains. The stock moved higher after we purchased it but gave up those gains in January when the company reported weaker-than-expected shipping volumes and a decline in revenue in the prior quarter. Despite the long-term growth tailwinds from the secular shift toward e-commerce, the shipping business is still cyclical, so disappointments will happen. However, we welcomed the market’s short-term focus as it provided us an opportunity to purchase UPS at an undemanding valuation of less than 11X our view of normalized earnings. UPS is a good transport operation that easily earns its cost of capital, generates significant free cash, has a wide economic moat, has a strong financial profile and pays an attractive dividend yielding 4%. With the new 5-year labor agreement completed, we believe UPS can focus on regaining lost volume and improving its cost structure.”
