In this article, we take a look at 12 blue chip stocks to buy that are down over 30% YTD.
Many stocks are considerably lower this year given the market headwinds in 2022.
Although the White House thinks there could be a soft landing given that the job market has still been really strong, many economists think there could be a recession next year as the Federal Reserve is expected to continue to raise interest rates. According to a December survey of 38 economists per Bloomberg, there’s a 70% probability the U.S. economy will enter into a recession in 2023.
As a result of the expected economic slowdown next year, there is a higher likelihood of lower than expected earnings for the broader market in 2023.
Because the market is future looking, broader market valuations have already decreased substantially in 2022. As of the indexes year to date as of December 26, the S&P 500 is down 19.84% and the Nasdaq Composite has fallen 33.70%. Even the blue chip heavy Dow Jones Industrial Average has retreated 9.24% in 2022.
Many stocks do not do well if company earnings significantly underperform and outlook dissapoints. If earnings and outlook misses substantially, many analysts also lower their future estimated earnings, which can potentially lower valuations further in some instances.
Blue Chip Companies
Blue chips are companies who have substantial competitive advantages that often also have a strong financial history of profitability. Many blue chips have a long history of returning capital back to shareholders via dividends or stock repurchases.
While blue chips as a whole have done better than the broader market, some blue chips have not done as well for various reasons.
Some blue chips in the tech sector have underperformed because the higher inflation has put pressure on the ad market which has led to slower growth. Many big tech blue chips have also seen their valuations decline given capital has moved from tech to U.S. government bonds considering the rising interest rates.
If economic data fails to meet expectations, there could be more downside in the near term. For the quality blue chip companies that grow their earnings, however, there’s upside in the long term. Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
Methodology
For our list of 12 Blue Chip Stocks to Buy That Are Down Over 30% YTD, we picked 12 stocks that have competitive advantages that are down over 30% year to date according to FINVIZ.com as of December 26.
We ranked the 12 stocks based on the number of hedge funds in our database that owned shares of the same stock at the end of Q3.
For those of you interested, also check out 12 Best Blue Chip Stocks That Outperformed in 2022.
12 Blue Chip Stocks to Buy That Are Down Over 30% YTD
12. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 49
Year to Date Performance as of 12/26: -32.37%
3M Company (NYSE:MMM) is a blue chip specialty industrial machinery conglomerate whose shares have declined 32.37% year to date. Given market headwinds, the company’s analyst earnings estimates have come down and the conglomerate’s stock has fallen as a result. Whereas three months ago, analysts were expecting 3M Company to earn $10.82 per share for FY23, they are now expecting $10.42 per share.
As a result of the decline, 3M Company trades for a forward P/E of 11.53, which is fairly attractive in the long term if the company can grow its earnings in the future.
Alongside Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META), and Amazon.com, Inc. (NASDAQ:AMZN), 3M Company is a blue chip with a quality business that’s down over 30% year to date.
11. Illumina, Inc. (NASDAQ:ILMN)
Number of Hedge Fund Holders: 49
Year to Date Performance as of 12/26: -49.73%
Illumina, Inc. (NASDAQ:ILMN) is a global leader in DNA sequencing and array based technologies. Given the expected growth in the area in the future, Illumina, Inc. has growth potential that makes it a quality business in many investors’ view despite its market capitalization of only $30.80 billion.
Given its potential, Illumina, Inc. has rallied from around $50 in 2012 to over $500 in 2021 before declining to $191.24 today.
Illumina, Inc. shares have declined this year as analyst expect the company’s earnings per share to decline to $2.46 in 2022 from $5.72 in 2021 given headwinds. In addition to lower demand, the company’s Grail acquisition has recently run into opposition from Euorpean antitrust regulators. Nevertheless, analysts do expect the company’s EPS to increase to $3.10 in 2023 and $4.49 in 2024. If the company can keep up its expected EPS growth rate, there’s ptoential long term upsdie.
10. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 51
Year to Date Performance as of 12/26: -30.74%
ASML Holding N.V. (NASDAQ:ASML) is a leading producer of semiconductor production equipment. Although the company has substantial barriers of entry in its sector of EUV lithography systems, ASML Holding N.V. is down 30.74% year to date given inflation has led to softer than expected end market demand. The higher inflation has also led to interest rates rising which has led to a broader big tech sell off that has decreased ASML Holding N.V.’s valuation.
Considering semiconductors are essential to many modern technologies and the company’s end markets are expected to grow substantially in the future, ASML Holding N.V. nevertheless has the potential to bounce back in the long term if it maintains its tech lead in its sector.
Of the 920 hedge funds in our database, 51 were long shares of ASML Holding N.V. at the end of Q3, ranking the stock #10 on our list of 12 Blue Chip Stocks to Buy That Are Down Over 30% YTD.
9. FedEx Corporation (NYSE:FDX)
Number of Hedge Fund Holders: 57
Year to Date Performance as of 12/26: -31.98%
FedEx Corporation (NYSE:FDX) shares have fallen 31.98% year to date given weaker than expected demand in Asia and challenges in Europe. As a result of the headwinds, FedEx Corporation shares fell substantially in September, before rallying somewhat from its yearly lows.
Since September, management has cut costs and the company trades for a forward P/E ratio of 10.40 as of 12/26. Although a recession could lead to potentially more earnings misses and potentially more downside in 2023, FedEx Corporation remains one of the leading logistics companies in the world and its valuation could be attractive in terms of the long term if management can increase earnings and demand bounces back.
8. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 59
Year to Date Performance as of 12/26: -32.51%
Prologis, Inc. (NYSE:PLD) is a leading industrial REIT whose shares have declined by 32.51% year to date as the REIT sector as a whole has underperformed this year. REITs have been under pressure this year given the Federal Reserve has raised interest rates seven times this year and the U.S. central bank is expected to continue to raise rates into next year as well. With the higher interest rates, Treasury yields are substantially higher and substantial capital has moved from REITs into Treasuries as a result.
While there could be further headwinds if there is a recession next year, the Federal Reserve will win its battle against inflation in the long run and interest rates will normalize. If interest rates normalize, Prologis, Inc.’s valuation could potentially benefit if management meets EPS estimates.
59 hedge funds in our database owned shares of Prologis, Inc. at the end of Q3, ranking the stock #8 on our list of 12 Blue Chip Stocks to Buy That Are Down Over 30% YTD.
7. Autodesk, Inc. (NASDAQ:ADSK)
Number of Hedge Fund Holders: 62
Year to Date Performance as of 12/26: -33.08%
Autodesk, Inc. (NASDAQ:ADSK) is a leading 3D design software company whose growth has slowed given macroeconomic headwinds. Given more macroeconomic uncertainty, many enterprise companies are opting for shorter payment durations and less multiyear prepayments to preserve cash. As a result, demand for Autodesk, Inc. isn’t as strong as previously expected and shares of the company are down 33.08% year to date. For FY23, the company also expects adjusted EPS of $6.56-$6.62 versus the consensus of $6.62.
Nevertheless, bulls do think Autodesk, Inc. has long term opportunity in terms of growth and margin improvement and analysts expect the company’s EPS to rise from $5.01 in 2022 to $6.59 in 2023, $7.40 in 2024, and $8.66 in 2025.
6. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 70
Year to Date Performance as of 12/26: -30.25%
Premium apparel leader NIKE, Inc. (NYSE:NKE) hasn’t done well this year given rising inflation has led many consumers to buy cheaper apparel alternatives. As a result, NIKE, Inc.’s inventories have been higher than some expectations and the company’s demand has been weaker.
If there is a recession next year, there’s potential for weaker demand again in 2023. Nevertheless, NIKE, Inc. does have a great brand and its scale gives it potential to realize attractive margins. In the long term, the company remains a blue chip with upside if management can meet EPS estimates.
Like NIKE, Inc., Alphabet Inc., Meta Platforms, Inc., and Amazon.com, Inc. are blue chips with quality businesses that are down over 30% year to date.
5. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 89
Year to Date Performance as of 12/26: -48.30%
NVIDIA Corporation (NASDAQ:NVDA) is a leader in GPUs that should benefit from the increasing demand for AI processing in the future if GPUs manage to continue to be better at some processing than CPUs for certain AI tasks.
Given the rising inflation this year, however, GPU end markets have been weaker than expected and demand for NVIDIA Corporation hasn’t met estimates. As a result, the stock is down 48.30% year to date.
Although the stock still has a forward P/E ratio of 35.3, NVIDIA Corporation does have substantial EPS growth potential past next year if it keeps up its technological innovation.
89 hedge funds in our database owned shares of the stock at the end of September, ranking NVIDIA Corporation #5 on our list of 12 Blue Chip Stocks to Buy That Are Down Over 30% YTD.
4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 112
Year to Date Performance as of 12/26: -43.18%
Given the company is a blue chip with quality assets, The Walt Disney Company (NYSE:DIS) shares aren’t normally as volatile as they have been for 2022.
Given some of The Walt Disney Company’s outperformance in past years has been due to Disney+’s expected future growth, the decline this year has at least partly been as a result of decreasing valuations in tech companies. Higher than expected costs and macroeconomic headwinds have not helped The Walt Disney Company this year either.
Nevertheless, The Walt Disney Company has quality assets that could allow it to bounce back in the long term.
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 156
Year to Date Performance as of 12/26: -37.92%
Much has been written about OpenAI’s ChatGPT and how it could affect Alphabet Inc.’s search market share in the future. While there could be more competition in the future in search, Alphabet Inc. does have AI technology that’s as good or perhaps better than ChatGPT but the company hasn’t released it because it isn’t really accurate yet.
In the future, the new markets AI could create could offer substantially bigger opportunities for Alphabet Inc. than search. If Alphabet Inc. successfully innovates in AI, there’s potential to increase EPS in the long term.
As it stands, the stock is more high risk/high reward than before as the market will want to see how Alphabet Inc. reacts to the new competition.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
Year to Date Performance as of 12/26: -64.91%
Meta Platforms, Inc. is down substantially this year given the social media giant has spent a lot of money on the metaverse without getting much in the way of immediate results. Meanwhile, Meta Platforms, Inc. faces rising competition from TikTok and its growth has slowed substantially.
Considering Mark Zuckerberg owns controlling shares of the company, Meta Platforms, Inc.’s fortunes will ultimately depend on his management. Given a company with Meta Platforms, Inc.’s resources, Zuckerberg can make a few mistakes in the near term and still win the long term, however. Meta Platforms, Inc. looks cheap with a forward P/E ratio of 14.86 in terms of the next 10 years if it retains its users.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 269
Year to Date Performance as of 12/26: -48.87%
As a result of rising inflation, e-commerce demand for Amazon.com, Inc. has slowed and corporate spending on the cloud has been more cautious than before. As a result, Amazon.com, Inc. shares have declined 48.87% year to date.
If the Federal Reserve wins its battle against inflation in the long term, demand for Amazon.com, Inc. could bounce back and the company’s stock could also benefit. At the end of Q3, 269 hedge funds in our database owned shares of Amazon.com, Inc., ranking the stock #1 on our list of 12 Blue Chip Stocks to Buy That Are Down Over 30% YTD.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a look at 11 Cheap NASDAQ Stocks to Buy and 10 Best Cheap Stocks to Buy Now for Long Term.
Follow Insider Monkey on Twitter
Suggested articles:
- 25 Most Technologically Advanced Countries in the World in 2022
- 12 Most Advanced Countries in Renewable Energy
- 20 Countries That Produce the Most Electric Power
This article is originally published at Insider Monkey.
