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.”
11. Wells Fargo & Company (NYSE:WFC)
Forward P/E, as of September 22: 11.0
Analyst Upside Potential, as of September 22: 12%
Number of Hedge Fund Holders: 83
Wells Fargo & Company (NYSE:WFC) is one of the most undervalued blue chip stocks to buy according to analysts. The financial services company was founded in 1852 and is based in California, United States. Wells Fargo provides a range of services including asset management, banking, commodities, insurance, investment management, and mortgage loans.
The company has almost $1.9 trillion in assets, making it one of the biggest financial services companies in the United States and globally. The company provides services to one in three households and covers almost 10% of small businesses in the United States.
In the second quarter of 2024, Wells Fargo & Company (NYSE:WFC) logged $20.69 billion in revenue, up by 1% year-over-year. Overall, the company’s auto segment greatly improved while the real estate department remained lumpy.
With a strong clientele of 68 million customers in 22 countries, Wells Fargo & Company (NYSE:WFC) has a strong network difficult for any other company to replicate. In addition to that, the company has over 5,600 branches and more than 11,000 ATMs.
Analysts are also bullish on WFC and their 12-month median price target of $63 points to a 12% upside from current levels. At the end of Q2 2024, there were 83 hedge funds that held positions in the stock with total stakes amounting to $5.68 billion. As of June 30, Harris Associates was the largest shareholder with a position worth $1.27 billion.
10. Exxon Mobil Corporation (NYSE:XOM)
Forward P/E, as of September 22: 13.9
Analyst Upside Potential, as of September 22: 13%
Number of Hedge Fund Holders: 92
Exxon Mobil Corporation (NYSE:XOM) ranks 10th on our list of the most undervalued blue chip stocks to buy according to analysts. The oil and gas multinational specializes in the exploration and production of crude oil and natural gas across the globe.
During the second quarter, the company’s upstream total net production expanded by 15%, equivalent to 574,000 oil barrels per day. Moreover, product sales increased by 10%. During the same quarter, the company logged $93.06 billion in revenue, up by 12.24%, and ahead of market consensus by $3.38 billion.
On the renewable energy front, Exxon Mobil Corporation (NYSE:XOM) completed its acquisition of Pioneer Natural Resources earlier in May. The acquisition will allow the company to increase its oil production to 2 million barrels per day by 2027. Moreover, Exxon Mobil (NYSE:XOM) will leverage Pioneer’s expertise to accelerate its net-zero emissions goal from 2050 to 2035. The company also reached an agreement with Air Liquide to produce carbon-free hydrogen, with 98% of CO2 removed.
In addition to that, Exxon Mobil Corporation (NYSE:XOM) paid $4.3 billion in dividends and initiated a $5.2 billion share repurchase program. Thus, XOM is not just a prominent player in the industry, but it is also a promising stock in terms of investor returns.
9. Bank of America Corporation (NYSE:BAC)
Forward P/E, as of September 22: 12.3
Analyst Upside Potential, as of September 22: 13%
Number of Hedge Fund Holders: 92
Bank of America Corporation (NYSE:BAC) is a financial services company that ranks ninth on our list of the most undervalued blue chip stocks to buy according to analysts. The company provides investment and wealth management services to individuals, institutions, small to medium-sized businesses, large corporations, and the government.
In the second quarter of 2024, Bank of America Corporation (NYSE:BAC) added another 278,000 net new checking accounts, bringing its fiscal half-year 2024 total to 500,000. As for the wealth management segment, the company maintained 6,100 new relationships and added thousands of small businesses in its commercial business sector. Bank of America now manages $5.7 trillion in client balances, loans, deposits, and investments in its consumer and wealth management segments.
Its financial results aside, the Tier 1 investment company is also among the top credit card issuers in the United States and has one of the best retail networks across the country. Bank of America Corporation’s (NYSE:BAC) position in the market is evident from its 69-million-individual customer base, 3,800 retail locations, and 15,000 ATMs across the United States. Overall, the company has 58 million verified digital users, with 47 million active mobile users.
Analysts are also bullish on BAC and their 12-month median price target of $45.5 points to a 13% upside from current levels. In Q2 2024, there were 92 hedge funds that held positions in the stock with total stakes amounting to $48.1 billion. As of June 30, Berkshire Hathaway was the largest shareholder with a position worth $41.1 billion.
ClearBridge Investments’ ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
8. Citigroup Inc. (NYSE:C)
Forward P/E, as of September 22: 10.7
Analyst Upside Potential, as of September 22: 14%
Number of Hedge Fund Holders: 85
Citigroup Inc. (NYSE:C) is one of the most undervalued blue chip stocks to buy according to analysts. The investment banking giant is based in New York and engages in the provision of asset management services, risk management services, investment management services, mortgage loans, credit cards, and other banking commodities.
In the second quarter of 2024, the company logged $20.1 billion in revenue and $3.2 billion in net income, up from $19.4 billion in revenue and $2.9 billion in net income from Q2 2023. Of this, its investment banking segment showed promising results and increased revenue by 38%
Citigroup Inc. (NYSE:C) has an on-ground presence in 90 countries, issues currencies in 144 countries, and has trading floors in 77 countries. Despite having such an extravagant network, the company is strongly inclined to expand. Previously, Citigroup Inc. (NYSE:C) launched commercial banking services in Japan. Moreover, the company also collaborated with Emirates NBD, a leading banking group, allowing corporate and retail clients in the Middle East, North Africa, and Turkiye to make USD payments anytime they want.
Overall, Citigroup Inc. (NYSE:C) is one of the most important names in the banking sector because of its expansive network and strong ecosystem. The company continues to enhance its position by initiating strategic partnerships with entities from across the globe.
Analysts are also bullish on C and their 12-month median price target of $71 points to a 14% upside from current levels. In Q2 2024, there were 85 hedge funds that held positions in the stock with total stakes amounting to $10.64 billion. As of June 30, Berkshire Hathaway was the largest shareholder with a position worth $3.51 billion.
Patient Capital Management stated the following regarding Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“Citigroup Inc. (NYSE:C) gained 24.1% in the quarter continuing its uptrend from 4Q. The company is on a multi-year journey to reorganize the business and reach return on tangible common equity of 11-12% by 2026 (and higher further out). Citigroup is finally taking the hard actions necessary, cutting unprofitable departments, taking out middle management layers, and reducing overall headcount. As of early March, the company was 70% done with its business exits and had reduced management layers by 1/4th. We have high confidence Citi will hit its targets. In the meantime, the company is returning cash to shareholders, which could meaningfully increase if the Basel III capital proposal is changed.”
7. Chevron Corporation (NYSE:CVX)
Forward P/E, as of September 22: 13.0
Analyst Upside Potential, as of September 22: 17%
Number of Hedge Fund Holders: 64
Chevron Corporation (NYSE:CVX) ranks seventh on our list of the most undervalued blue chip stocks according to analysts. The energy and petroleum company is headquartered in California, United States, and is present in more than 180 countries.
In the second quarter of 2024, Chevron Corporation (NYSE:CVX) grew global production by 11%, year-over-year. During the same quarter, the company forged alliances in Namibia, Brazil, Equatorial Guinea, and Angola to expand its exploration base and enhance its acreage position. As for the United States, Chevron’s (NYSE:CVX) net oil-equivalent production increased by 353,000 barrels a day from a year ago. Again, the company attributes such to its successful acquisitions and strategic alliances.
Chevron Corporation (NYSE:CVX) is also making strides in clean and renewable energy. Previously in May, the company operated a gas turbine on a 60% hydrogen fuel blend, significantly reducing emissions. Moreover, the company also owns a 16.5-megawatt wind farm that can power more than 13,000 homes annually.
Overall, Chevron Corporation (NYSE:CVX) reported revenue worth $51.8 billion, up by 4.67% year-over-year, and ahead of market consensus by $453.45 million, in this quarter. The stock has huge potential in the clean energy industry, making it one of the most undervalued blue chip stocks to buy according to analysts.
Analysts are bullish on CVX and their 12-month median price target of $170 points to a 17% upside from current levels. In Q2 2024, there were 64 hedge funds that held positions in the stock with total stakes amounting to $22.41 billion. As of June 30, Berkshire Hathaway was the largest shareholder with a position worth $18.55 billion.
Diamond Hill Capital’s Diamond Hill Large Cap Strategy stated the following regarding Chevron Corporation (NYSE:CVX) in its fourth quarter 2023 investor letter:
“Other bottom contributors included Chevron Corporation (NYSE:CVX), Carrier Global and Becton, Dickinson. Shares of integrated oil and gas company Chevron were pressured as global oil production is growing — particularly in the US, which has now surpassed its past production levels — in turn pressuring oil prices and company profit margins.”
6. Merck & Co., Inc. (NYSE:MRK)
Forward P/E, as of September 22: 14.4
Analyst Upside Potential, as of September 22: 20%
Number of Hedge Fund Holders: 96
Merck & Co., Inc. (NYSE:MRK) ranks sixth on our list of the most undervalued blue chip stocks to buy according to analysts. Merck & Co., Inc. (NYSE:MRK), a pharmaceutical giant in the United States, specializes in the production of vaccines and the provision of hospital care services.
The company has over 52 drugs in rotation in the United States reaching over 500 million people in 2023 alone. The company’s leading cancer drug, which received approval in 2014, brought in $26.3 billion in sales in 2023. Coming to Q2 2024, the star drug logged $7.3 billion in sales, growing 16% year-over-year.
The company is not just a leading drug provider, but it is also strongly inclined to expand. Recently, the company closed the acquisition of EyeBio, expanding its presence in the ophthalmology industry. The acquisition will help the company invent a treatment for retinal conditions. Its Animal Health segment also closed the acquisition of Elanco’s aqua business, presenting Merck & Co., Inc. (NYSE:MRK) as a leader in the animal health business.
Merck & Co., Inc.’s (NYSE:MRK) commitment to innovation makes it a dominant player in the industry, given that it spent $30.5 billion in research and development expenses in 2023. In addition to that, its large infrastructure allows Merck to make drugs and vaccines at a lower cost compared to smaller companies, giving it a solid competitive edge.
Analysts are bullish on MRK and their 12-month median price target of $140 points to a 20% upside from current levels. In Q2 2024, there were 96 hedge funds that held positions in the stock with total stakes amounting to $7.76 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $1.77 billion.
Baron Funds’ Baron Health Care Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its first quarter 2024 investor letter:
“Global pharmaceutical company Merck & Co., Inc. (NYSE:MRK), Inc. contributed on the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”
5. Sony Group Corporation (NYSE:SONY)
Forward P/E, as of September 22: 15.6
Analyst Upside Potential, as of September 22: 21%
Number of Hedge Fund Holders: 29
Sony Group Corporation (NYSE:SONY) is a leading technology company that engages in the design, development, and production of electronics and related devices for consumers across the globe. Some of its products include gaming consoles, televisions, and mobile devices.
In the fiscal first quarter of 2024, Sony Group Corporation (NYSE:SONY) logged $20.5 billion in revenue, driven by its games and entertainment segment. Its gaming segment saw an increase of 20% in sales. Revenue from its music segment, on the other hand, grew by 23%, to reach 442 billion yen.
Not only is the company witnessing an increase in subscribers, but it is also witnessing growth across borders in its music segment. For the ninth consecutive year, Sony (NYSE:SONY) saw its market grow for recorded music due to price revisions by music distributors. In addition to that, the number of monthly active users of the PlayStation grew to 116 million accounts, the highest ever for June, up by 7% year-over-year.
For the fiscal year ended 2024, Sony Group Corporation (NYSE:SONY) expects revenue to reach 4.32 trillion yen, up by 120 billion yen from the previous forecast. Overall, the company’s diversified model is its economic moat, allowing it to spread its risks evenly across multiple segments. This explains why analysts are bullish on the stock and their 12-month median price target of $115 points to a 21% upside from current levels.
4. The Walt Disney Company (NYSE:DIS)
Forward P/E, as of September 22: 18.9
Analyst Upside Potential, as of September 22: 23%
Number of Hedge Fund Holders: 92
The Walt Disney Company (NYSE:DIS) is a multinational mass media company that ranks fourth on our list of the most undervalued blue chip stocks to buy according to analysts. The business operates across five major segments including media networks, parks and resorts, studio entertainment, consumer products, and interactive media.
In the fiscal third quarter of 2024, the company reported revenue worth $24.5 billion, up 7% year-over-year. While its revenue was partially driven by its world-famous parks, Its domestic parks and cruise chips segment accounted for 60% of operating income.
Additionally, Walt Disney (NYSE:DIS) received countless nominations for its movies and shows and broke records by bagging its 60th Emmy on the 76th Emmy Awards Show. There is no denying that Walt Disney (NYSE:DIS) has a competitive edge. It is home to some of the world’s biggest studios, including Pixar, Marvel, and Lucasfilm, all categorized as intellectual property, making it quite impossible for any rival to copy.
Recently, Walt Disney (NYSE:DIS) signed an agreement with the National Basketball Association, allowing Disney to stream all related NBA events on ESPN’s direct-to-consumer platform launching in 2025. While there may be questions over Disney’s profitability, its direct-to-consumer services like Disney+, Hulu, and ESPN+ are promising, logging their first operating profit in the fiscal third quarter of 2024.
Analysts are bullish on DIS and their 12-month median price target of $115 points to a 23% upside from current levels. 92 hedge funds held positions in the stock at the end of Q2 2024. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $787.9 million.
Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
3. Shell Plc (NYSE:SHEL)
Forward P/E, as of September 22: 8.4
Analyst Upside Potential, as of September 22: 23%
Number of Hedge Fund Holders: 49
Shell Plc (NYSE:SHEL) is one of the most undervalued blue chip stocks to buy according to analysts. The global energy company is engaged in the exploration, production, refining, and trading of LNG, crude oil products, and other related products.
In the second quarter of 2024, Shell Plc (NYSE:SHEL) signed new agreements, further enhancing its position in LNG. The company agreed to acquire Pavilion Energy in Singapore and in early July the company initiated two separate investment decisions in LNG projects in Trinidad and Tobago and Abu Dhabi.
The company is also strengthening its position in renewable energy. At the start of 2024, Shell Plc (NYSE:SHEL) had around 2.5 gigawatts (GW) of renewable energy in operations, 4.1 GW under construction, and nearly 40.2 GW of potential capacity.
In the second quarter of 2024, not only did the company initiate a further $3.5 billion buyback program for the next three months, but the company also logged $74.5 billion in revenue. It is evident that despite geopolitical tensions, the company remains resilient and therefore deserves a position on our list.
Analysts are bullish on SHEL and their 12-month median price target of $84.5 points to a 23% upside from current levels. Overall, 49 investors were bullish on the stock at the end of Q2 2024, with total stakes amounting to $6.06 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $1.73 billion.
Third Point Management made the following comment about Shell plc (NYSE:SHEL) in its second quarter 2023 investor letter:
“We initiated a position in Shell plc (NYSE:SHEL) in the summer of 2021 and highlighted the company’s significant discount to intrinsic value as well as to US-listed peers after decades of poor performance. While shares have performed well since we initiated the investment, the company still trades at staggering discount to intrinsic value and represents a compelling investment at current levels. We initially argued (and still believe) that the fastest path to improved performance and better valuation would be a separation of Shell’s business units to better attract shareholders and improve accountability, the latter of which was essential when the company was in the hands of executives who had demonstrated virtually no focus on shareholder value creation.
The most important change at Shell over the past two years has been the upgrade in the management team, with the appointments of Wael Sawan as CEO and Sinead Gorman as CFO. They have demonstrated an unwavering commitment to shareholder value, capital discipline, and improved returns. At their recent analyst day, Mr. Sawan stated “underpinning all that we do will be a ruthless focus on performance, discipline, and simplification.” It was the third time they used the term “ruthless” in their presentation, sending a strong message to shareholders…”(Click here to read the full text)
2. NXP Semiconductors N.V. (NASDAQ:NXPI)
Forward P/E, as of September 22: 17.1
Analyst Upside Potential, as of September 22: 24%
Number of Hedge Fund Holders: 52
NXP Semiconductors N.V. (NASDAQ:NXPI) is a Dutch semiconductor manufacturing and design company. Some of its products include processors, microcontrollers, and sensors to name a few. NXP sells to some of the biggest companies in the world including Apple, Dell, Ericsson, and Samsung.
In the second quarter of 2024, NXP Semiconductors N.V. (NASDAQ:NXPI) logged $3.13 billion in revenue. During the same quarter, the company returned $260 billion in cash dividends and initiated the repurchase of $310 million of its common shares.
NXP Semiconductors (NASDAQ:NXPI) is one of the most undervalued blue chip stocks and we say that because of its strategic position in the industry. During the second quarter, the company announced a joint venture with VisionPower Semiconductor Manufacturing Company Pte Ltd to create a semiconductor wafer manufacturing facility in Singapore.
Towards the end of August, the European Commission approved aid worth EUR 5 billion for the construction of a microchip manufacturing plant in Dresden, Germany. The project will be led by European Semiconductor Manufacturing Company (ESMC), a joint venture between Taiwan Semiconductor Manufacturing Company, Bosch, Infineon, and NXP. By 2029, the plant will be able to produce 480,000 silicon wafers per annum.
Overall, NXP Semiconductors’ (NASDAQ:NXPI) position in the industry is remarkable. Its partnerships and projects add to its value, making it a crucial stakeholder. Moreover, as the demand for tech grows, so will the demand for NXPI.
Aristotle Large Cap Growth Strategy made the following comment about NXP Semiconductors N.V. (NASDAQ:NXPI) in its Q3 2023 investor letter:
“We sold NXP Semiconductors N.V. (NASDAQ:NXPI) to reduce our exposure to the automotive sector in semiconductors following the strong returns over the past 3 years. We are seeing early data of slowing global auto sales due to macroeconomic conditions and higher interest rates. While we think this may be a shorter-term slowdown, the risk is increasing of elevated inventory levels and pricing headwinds.”
1. Alphabet Inc. (NASDAQ:GOOGL)
Forward P/E, as of September 22: 21.4
Analyst Upside Potential, as of September 22: 25%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is one of the most undervalued blue chip stocks to buy according to analysts. The company owns a range of products, including Google Search, Google Maps, YouTube, Google Cloud, and Waymo.
The company is relentlessly working to improve the Gemini experience and is also actively involved in developing AI hardware, having launched its NVIDIA chip rival in May. Moreover, the latest version of Gemini has accelerated performance across text, audio, video, and code.
While Google’s tensor processing units (TPU) only account for almost 20% of the market, its advancements promise higher market shares. In addition to that, its six-generation chips are 67% more energy efficient compared to the previous generation of processors.
Alphabet Inc. (NASDAQ:GOOGL) logged revenue worth $85 billion in the fiscal second quarter of 2024, driven by the growing momentum in cloud and search. Additionally, over 60% of generative AI startups and 90% of generative AI unicorns are customers of the Google Cloud. One can infer that the technology giant is well-positioned to exploit the next wave of artificial intelligence and innovation, making it a solid investment.
Analysts are bullish on GOOGL and their 12-month median price target of $205 points to a 25% upside from current levels. Overall, 216 investors held stakes worth $35.31 billion in Alphabet Inc. (NASDAQ:GOOGL). Of those, Fisher Asset Management was the highest stakeholder with a position of $8.86 billion.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
Overall, GOOGL ranks first among the 13 most undervalued blue chip stocks to buy according to analysts. Our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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