In this article, we’ll explore the 7 Undervalued Blue Chip Stocks To Buy Right Now.
Kristen Bitterly, Head of Global Strategy at Citi, recently appeared on CNBC’s Squawk Box and explained how inflation and employment trends played a role in recent decisions from the Fed. Bitterly stated that while they had anticipated a 25-basis point rate cut due to some sticky inflation data, especially around the owner’s equivalent rent, she noted that the difference between a 25 or 50 basis point cut shouldn’t be overanalyzed. What matters most is the overall trajectory of rates moving forward, and as long as employment data remains stable, the Federal Reserve and the market are aiming for a soft landing.
Discussing rate cuts during a time of record stock market highs and low unemployment, Bitterly acknowledged the unusual timing. Typically, rate cuts happen during crises; however, she suggested that the Federal Reserve may be trying to stay ahead of a potential slowdown. She highlighted that the Fed’s main focus is on employment and price stability, not necessarily on stock market highs. Now that inflation is somewhat under control, the focus has shifted to keeping unemployment around 4%.
When asked about potential inflation risks, Bitterly mentioned ongoing infrastructure, CHIPS Act, and IRA spending, which could indeed lead to inflationary pressures. While the Fed’s projections may be too optimistic about inflation falling to 2.5%, she pointed out that we’re dealing more with disinflation rather than deflation.
“When we look at the Statement of Economic Projections, you might be right—they could be too aggressive in predicting where inflation will be. It might hover around 2.5%, and that could be sustainable in the near future. We’re not talking about deflation, just disinflation. The price increases we’ve seen are still there, even if inflation is coming down.”
On the strength of retail sales, Bitterly highlighted a strong economic backdrop, noting $6.5 trillion in money market funds, decreasing inflation, and record profitability among U.S. companies. Despite concerns like election volatility, she believes there’s still significant capital looking to enter the market, making for a favorable outlook. Bitterly predicted that the S&P 500 would likely finish the year higher, although October might be challenging due to election-related uncertainty. Historically, election years see a dip in October as investors take profits, but a rally usually follows once election results are clear.
Looking ahead to next year, she expects a return to fundamentals. With 10 out of 11 sectors anticipated to show earnings growth this year, and possibly all sectors growing in 2025, she emphasized that tariffs and taxation are important factors, but ultimately driven by policy rather than politics.
“Next year, we return to fundamentals. After the election, we focus on fundamentals. This year, we expect 10 out of 11 sectors to show earnings growth, compared to 7 out of 11 last year, which was an earnings recession. It could be 11 out of 11 going into 2025. On the election front, people are looking at tariffs and taxation, but policy drives that more than politics.”
With that, let’s take a look at the 7 undervalued blue chip stocks to buy now.
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Our Methodology
In this article, we screened for large to mega cap stocks that were trading at a forward P/E of less than 20. We identified 20 blue chip stocks that met our criteria and then selected the stocks that were the most popular among elite hedge funds, as of Q2 2024, and that analysts were bullish on. The stocks are sorted in ascending order of their upside potential, as of September 24.
At Insider Monkey we are obsessed with 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).
7 Undervalued Blue Chip Stocks To Buy Right Now
7. JPMorgan Chase & Co. (NYSE:JPM)
Analyst Upside Potential: 4.73%
Forward P/E, as of September 24: 12.47
Number of Hedge Fund Holders: 111
JPMorgan Chase & Co. (NYSE:JPM) ranks 7th in our list of the 7 undervalued blue chip stocks to buy right now. Despite a slight uptick in credit losses, JPMorgan Chase & Co. (NYSE:JPM)’s diversified operations across consumer and commercial banking, investment banking, and asset management provide multiple avenues for growth. Its leadership position in global banking ensures it remains resilient even amid economic uncertainties.
JPMorgan Chase & Co. (NYSE:JPM)’s significant market capitalization of $600.1 billion and a forward P/E ratio of 12.47 suggest that it is well-positioned for continued expansion and value creation. As interest rates stabilize and economic conditions improve, JPMorgan Chase & Co. (NYSE:JPM) is likely to benefit from increased lending activity and operational efficiencies. Additionally, its strong balance sheet enables it to invest in growth initiatives and adapt to changing market dynamics, making it a solid investment opportunity with significant upside potential.
JPMorgan Chase & Co. (NYSE:JPM) delivered strong Q2 2024 results, with a 15% jump in net interest income due to favorable interest rate conditions. The acquisition of First Republic Bank further bolstered its market position, particularly in wealth management.
While there has been a slight rise in credit losses, JPMorgan Chase & Co. (NYSE:JPM)’s diversified business model across consumer and commercial banking, investment banking, and asset management provides it with multiple growth avenues. Its leadership position in global banking and financial services ensures continued growth even amid economic uncertainty.
6. Johnson & Johnson (NYSE:JNJ)
Analyst Upside Potential: 4.78%
Forward P/E, as of September 24: 15.02
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ) ranks 6th in our list of 7 undervalued blue chip stocks to buy right now. Johnson & Johnson (NYSE:JNJ)’s Q2 2024 earnings were strong, with a revenue increase of 4.3% to $22.4 billion, driven primarily by its pharmaceutical division, which grew by 7.8%. Despite some one-time charges, its adjusted earnings per share (EPS) rose by 10.2% to $2.82, exceeding expectations.
Following the spinoff of its consumer health division, Kenvue, Johnson & Johnson (NYSE:JNJ) has shifted its focus towards higher-margin areas such as pharmaceuticals and medical devices, positioning itself for long-term profitability. Johnson & Johnson (NYSE:JNJ)’s leadership in key therapeutic areas, including immunology and oncology, along with an innovative product pipeline, enhances its growth potential.
With a forward P/E ratio of 15.02 and a market capitalization of $390.6 billion, Johnson & Johnson (NYSE:JNJ) appears undervalued relative to its growth prospects. Johnson & Johnson (NYSE:JNJ)’s strong balance sheet and commitment to research and development further bolster its position in the healthcare sector. As it navigates a post-pandemic landscape, Johnson & Johnson (NYSE:JNJ) is well-positioned to capitalize on increased healthcare spending and demographic trends, making it a compelling investment opportunity for long-term growth.
5. Exxon Mobil Corporation (NYSE:XOM)
Analyst Upside Potential: 11.22%
Forward P/E, as of September 24: 12.69
Number of Hedge Fund Holders: 92
Exxon Mobil Corporation (NYSE:XOM) ranks 5th in our list of the 7 undervalued blue chip stocks to buy right now. With a forward P/E ratio of 12.69 and a market capitalization of $519.94 billion, Exxon Mobil Corporation (NYSE:XOM) is positioned attractively compared to its peers. Exxon Mobil Corporation (NYSE:XOM)’s aggressive expansion into liquefied natural gas (LNG) projects in Mozambique and the U.S. aligns with the global shift towards cleaner energy alternatives, responding to increasing demand for sustainable energy sources.
Additionally, its investments in carbon capture technology and biofuels showcase a commitment to sustainability, positioning Exxon Mobil Corporation (NYSE:XOM) for long-term growth as the energy landscape evolves. Exxon Mobil Corporation (NYSE:XOM)’s strong cash flow generation from its core oil and gas operations provides the financial flexibility necessary to invest in innovative projects while returning value to shareholders through dividends and share buybacks.
As the transition to cleaner energy accelerates, Exxon Mobil Corporation (NYSE:XOM)’s diversified portfolio and strategic initiatives position it well to capitalize on both traditional and renewable energy opportunities, making it an attractive choice for investors seeking growth in the energy sector. Exxon Mobil Corporation (NYSE:XOM)’s ability to generate significant cash flows from its core oil and gas businesses supports further growth.
4. Bank of America Corporation (NYSE:BAC)
Analyst Upside Potential: 15.28%
Forward P/E, as of September 24: 11.07
Number of Hedge Fund Holders: 92
Ranking 4th in our list of the 7 undervalued blue chip stocks to buy right now is Bank of America Corporation (NYSE:BAC). The company’s Q2 2024 earnings demonstrated strength, with net interest income growing by 13%, largely due to higher interest rates. Although rising deposit costs created some pressure on its consumer banking unit, Bank of America Corporation (NYSE:BAC)’s diversified revenue streams helped offset this.
Despite some pressures from rising deposit costs, Bank of America Corporation (NYSE:BAC)’s diversified business model mitigates risks and supports resilience across its various segments, including wealth management and investment banking. Bank of America Corporation (NYSE:BAC)’s investment banking and capital markets division demonstrated strong performance even in challenging market conditions, further solidifying its competitive advantage.
As interest rates stabilize, Bank of America Corporation (NYSE:BAC) is well-positioned to benefit from operational efficiencies, a solid balance sheet, and an increase in lending activity. With a forward P/E ratio of 11.07 and a market capitalization of $305.9 billion, Bank of America Corporation (NYSE:BAC) appears attractively valued compared to peers. Additionally, Bank of America Corporation (NYSE:BAC)’s ongoing focus on technology and digital banking enhances customer experience and drives cost efficiencies.
Overall, Bank of America Corporation (NYSE:BAC)’s strong financials, diversified revenue sources, and strategic initiatives make it a compelling choice for investors seeking exposure to a leading financial institution poised for continued growth.
3. Alibaba Group Holding Limited (NYSE:BABA)
Analyst Upside Potential: 15.79%
Forward P/E, as of September 24: 10.49
Number of Hedge Fund Holders: 91
Alibaba Group Holding Limited (NYSE:BABA) ranks 3rd in our list of the 7 undervalued blue chip stocks to buy right now. Alibaba Group Holding Limited (NYSE:BABA) has initiated a significant restructuring by dividing it into six business units, each with the potential for an independent IPO. This move is expected to unlock shareholder value. Q2 2024 saw steady performance from Alibaba Group Holding Limited (NYSE:BABA)’s core commerce business, and the cloud computing division continues to grow, supported by China’s push towards digital transformation.
In Q2 2024, Alibaba Group Holding Limited (NYSE:BABA) demonstrated steady performance, particularly in its core commerce business, while its cloud computing division continues to expand, benefiting from China’s digital transformation initiatives. This growth is supported by increasing demand for cloud services and e-commerce, positioning Alibaba Group Holding Limited (NYSE:BABA) favorably in these high-growth sectors.
Furthermore, Alibaba Group Holding Limited (NYSE:BABA)’s emphasis on cost management and strategic partnerships within China’s tech ecosystem enhances its recovery prospects, especially as the Chinese economy rebounds. Alibaba Group Holding Limited (NYSE:BABA)’s investments in artificial intelligence (AI) and innovation in e-commerce platforms position it well for future growth, enabling it to capitalize on emerging market trends.
With a forward P/E ratio of 10.49 and a market capitalization of $230.4 billion, Alibaba Group Holding Limited (NYSE:BABA) appears undervalued compared to its growth potential. Overall, the combination of its restructuring efforts, strong performance in core areas, and strategic investments makes Alibaba Group Holding Limited (NYSE:BABA) a promising candidate for long-term growth and value appreciation.
2. Merck & Co. Inc. (NYSE:MRK)
Analyst Upside Potential: 21.81%
Forward P/E, as of September 24: 11.55
Number of Hedge Fund Holders: 96
Merck & Co. Inc. (NYSE:MRK) landed on the 2nd spot in our list of the 7 undervalued blue chip stocks to buy right now. Merck & Co. Inc. (NYSE:MRK)’s Q2 2024 earnings benefited from the continued success of its flagship cancer drug, Keytruda, and the human papillomavirus vaccine, Gardasil. These products saw strong demand globally.
Merck is also strategically increasing its research and development (R&D) spending, particularly in high-growth areas such as oncology and immunology. This commitment to innovation is underscored by its recent acquisition of Prometheus Biosciences, which enhances its capabilities in developing cutting-edge therapies and strengthens its pipeline.
Furthermore, with a forward P/E ratio of 11.55 and a market capitalization of $291.4 billion, Merck is well-positioned for future earnings growth as it capitalizes on emerging opportunities in the pharmaceutical market. The company’s focus on high-margin, high-demand products, coupled with a solid financial foundation, positions Merck favorably for long-term success.
Overall, the combination of a strong product lineup, strategic investments in R&D, and a focus on innovation makes Merck & Co. Inc. (NYSE:MRK) an attractive investment for those seeking exposure to the healthcare sector.
1. Alphabet Inc. (NASDAQ:GOOG)
Analyst Upside Potential: 25.41%
Forward P/E, as of September 24: 18.62
Number of Hedge Fund Holders: 165
Ranking 1st in our list of the 7 undervalued blue chip stocks to buy right now is Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc. (NASDAQ:GOOG)’s Q2 2024 results were driven by robust growth in its Google Cloud segment, which expanded by 28%. Its core search business remains resilient despite macroeconomic headwinds. A key driver of Alphabet Inc. (NASDAQ:GOOG)’s future growth is its substantial investment in AI, particularly through its Bard AI platform and enhancements to its cloud computing capabilities. This positions Alphabet Inc. (NASDAQ:GOOG) as a frontrunner in the rapidly evolving AI sector, which is expected to transform various industries and create new revenue streams.
With a forward P/E ratio of 18.62 and a market capitalization exceeding $2 trillion, Alphabet Inc. (NASDAQ:GOOG)’s strong balance sheet provides it with the flexibility to continue investing in innovation while navigating economic uncertainties. Its leadership in digital advertising further reinforces its revenue-generating capabilities, making it well-equipped to adapt to changing market dynamics.
Overall, Alphabet Inc. (NASDAQ:GOOG)’s combination of strong financial performance, strategic investments in AI, and leadership in digital services supports a bullish outlook, positioning it favorably for long-term growth and investor value creation.
Parnassus Growth Equity Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Alphabet Inc.’s (NASDAQ:GOOG) stock rose on the strength of robust first-quarter revenue growth underpinned by noteworthy gains in search advertising, YouTube advertising and the cloud business. Signs that the company is accelerating its development of AI solutions buoyed investor optimism.”
While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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