We recently compiled a list of the 12 Best Blue Chip Stocks to Buy Under $100. In this article, we are going to take a look at where Walmart Inc. (NYSE:WMT) stands against other best blue chip stocks to buy under $100.
Blue chip stocks have long been considered the gold standard of investments, offering a combination of steady growth, consistent dividends, and a reputation for weathering economic downturns.
The term “blue chip” originated from poker, where blue chips were the highest denomination of chips used in the game. In the early 20th century, the term was adopted by financial analysts to describe the stocks of large, well-established companies with a proven track record of success. These companies were considered to be the best of the best. Today, blue chip stocks are typically defined as the stocks of large, well-established companies that have a large market capitalization. These companies are usually industry leaders, with a strong brand, a diverse product or service offering, and a history of consistent profitability. Blue chip stocks offer a relatively low level of risk, particularly when compared to smaller, more volatile stocks. This makes them an attractive option for conservative investors, who are looking to preserve their capital and generate steady returns.
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In an interview with Yahoo Finance on December 21, David Wagner, Portfolio Manager at Aptus Capital Advisors, provided a detailed analysis of the current market dynamics and his investment strategy. One of the key points Wagner made was his preference for large-cap stocks over small-cap stocks. This stance was particularly noteworthy given his extensive experience in small-cap investing and running a small-cap strategy for over a decade. Wagner explained that while small caps were not all equal, many passive small-cap investments include a significant portion of unprofitable companies. He cited data showing that passive small-cap investors often had 40% of their assets invested in companies that lacked profitability, which could be a significant risk in a volatile market.
In contrast, large-cap stocks, particularly those in the S&P 500 have a strong operating leverage. Wagner noted that the S&P 500 is projected to see earnings per share (EPS) growth of 15% in the following year, driven by revenue growth of only 5%. This operating leverage, he argued, was a unique characteristic of large-cap stocks and provided a compelling reason to favor them over small-caps. He explained that operating leverage amplifies the impact of revenue growth on earnings, which can lead to more significant returns for investors.
Wagner also highlighted the evolving nature of the S&P 500. He noted that large-cap stocks were increasingly benefiting from operational efficiencies and economies of scale, which were not as prevalent in small-cap or international markets. Small-cap stocks, he observed, were more service-oriented and often lacked the robust profit margins and revenue diversification seen in large-cap companies.
Wagner further emphasized that while operating leverage could work both ways, potentially leading to more pronounced negative returns in a downturn, it was currently working in favor of large-cap stocks. He forecasted that the market would see more “tailed” returns, meaning that the best-performing large-cap stocks would outperform more significantly, while the worst-performing ones would underperform more severely. This dynamic, he argued, made large-cap stocks an attractive investment option.
Blue chip stocks continue to be a cornerstone of a well-diversified investment portfolio, offering stability, steady growth, and resilience in uncertain economic conditions. Therefore, the case for investing in these stocks remains compelling.
A manager standing in a hypermarket, pointing out items available for wholesale.
Our Methodology
To compile our list of the 12 best blue chip stocks to buy under $100, we used blue chip ETFs plus online rankings to compile a list of 25 companies. We then used Insider Monkey’s Hedge Fund database to rank 12 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holdings: 88
Stock Price as of January 24: $94.76
Walmart Inc. (NYSE:WMT) is one of the world’s largest retailers with a vast network of stores and an expanding e-commerce platform. The company offers groceries, apparel, and general merchandise at competitive prices. Walmart Inc.’s (NYSE:WMT) strong brand, supply chain efficiency, and focus on digital transformation contribute to its status as a reliable blue-chip investment.
Walmart Inc. (NYSE:WMT) is aggressively expanding its e-commerce business, with a focus on creating a convenient and personalized shopping experience for its customers. The company has seen significant growth in its online sales and is leveraging its vast network of stores to offer fast and reliable delivery options, including same-day and next-day delivery, to meet the evolving expectations of its customers.
Walmart Inc. (NYSE:WMT) is also investing in emerging technologies, such as automation and artificial intelligence, to enhance its operations and improve the customer experience. The company is rolling out automation technologies in its fulfillment centers, which has resulted in significant improvements in efficiency and productivity. Walmart Inc. (NYSE:WMT) is also using data analytics and machine learning to better understand its customers’ shopping behaviors and preferences, allowing the company to offer more personalized recommendations and promotions.
Overall WMT ranks 3rd on our list of the best blue chip stocks to buy under $100. While we acknowledge the potential of WMT as an investment, 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 WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
