10 best blue-chip stocks to buy for 2023
Blue-chip stocks offer reliable earnings and income even in a turbulent economy.
- By Ian Bezek,
- U.S. News & World Report
- – 12/21/2022
Blue-chip stocks are those that have top-notch reputations. They are the companies known for being high-quality, faring well during recessions and having the brands, managerial excellence and resiliency to prosper regardless of what's going on elsewhere in the economy.
While there is no one definitive list, people have generally looked to the Dow Jones Industrial Average (
While the Dow may have lost some of its luster, it regained its momentum in 2022. Through Dec. 20, the Dow is off 9.6% this year, whereas the S&P 500 and Nasdaq have seen much sharper losses of 19.8% and 32.6%, respectively. Here are 10 blue chips that should outperform in 2023.
For many years, investors felt that Amazon.com Inc. (
Home Depot Inc.
Home Depot (
However, home repair and remodeling drives a great deal of business for building supply stores, and that segment should be less affected during a housing bust. It's also worth considering that Home Depot stock regained all its 2008 financial crisis-era losses by early 2012. Home Depot's recovery should be even quicker this time around. Throw in strong long-term demographics for the housing market, and this current entry point at less than 20 times forward earnings looks attractive.
Warren Buffett is well-known for his love of Coca-Cola Co. (
Due to rising scrutiny of sugar consumption, the global obesity epidemic and the potential for sin taxes, soft drink sales could slide. PepsiCo helps offset this with its Frito-Lay snack food division. That gives the company diversification while also offering cross-selling benefits, shared marketing and greater supply chain leverage. PepsiCo isn't a flashy stock, but its tried-and-true combination of soft drinks and snack foods has led to a 13.2% annualized total return, which includes dividends, over the past decade. That sort of stability looks more attractive than ever given the recent bear market.
In addition, the crucial Chinese market remains stagnant due to COVID-19 restrictions in that country. However, little of this will matter to investors with long-term perspectives. Nike's brand hasn't diminished. If anything, the company has gained strength in recent years due to its industry-leading, direct-to-consumer sales channel. Nike is a blue-chip consumer stock currently going for a deep holiday discount.
Visa also enjoys large economies of scale, allowing it to offer individual transactions with low fees that fintech startups have struggled to match. Investors might think that the opportunity is coming to an end for Visa, as credit cards are already a well-established technology. But the pandemic gave another boost to the industry, as many stores prioritized cash-free checkout options. Emerging markets are another avenue for future growth opportunities. Visa shares typically trade for at least 30 times earnings, given the company's strong growth record. They're currently on sale for about 21 times forward earnings.
Procter & Gamble Co.
Procter & Gamble (
There is some risk from generic products or cheaper alternatives, but P&G's size and large marketing budget give it significant and persistent advantages against rivals. The product categories P&G serves also tend to change slowly. This means that P&G's earnings aren't too threatened by technological change. The company has focused on efficiency and strengthening internal processes in recent years, which has left the company on a strong footing to prosper through the current inflationary shock.
Johnson & Johnson
Johnson & Johnson (
The company has many smaller internal divisions overseeing individual products and niches. This decentralized structure has made J&J highly adaptive, as each unit can react quickly to challenges and opportunities in its respective market. J&J has had a remarkable run creating and managing so many unique drugs, devices and consumer products over the decades. JNJ stock is priced at a reasonable 17 times forward earnings. Furthermore, it has a fortress balance sheet: J&J holds a perfect AAA credit rating.
Long story short, this is one of the single-best companies to profit from the return of American manufacturing and industry, which seems increasingly likely, as firms are pulling factories out of China. MMM stock has had a terrible run over the past few years due to economic fears and lingering worries about some product liability lawsuits. Once these clear up, however, 3M should have considerable upside. Shares trade for about 12 times forward earnings and offer a 4.9% dividend yield.
Texas Instruments Inc.
Texas Instruments (
Texas Instruments is still well-known for calculators, but that is just a small piece of its business. Rather, the company primarily makes advanced chips for automobiles and other industrial uses. The firm has one of the longest track records in American electronics, and it is entering the next decade on a strong footing. The company is currently building out large new manufacturing facilities in Texas with financial backing from the Biden administration's CHIPS and Science Act. Shares currently go for 20 times forward earnings and offer a 3% dividend yield.
The oil and gas industry roared back to life over the past 18 months. That has made the oil blue chips, such as Chevron (
Chevron's substantial investments in liquefied natural gas, or LNG, have proven extremely valuable this year. Due to disruptions in the European gas market following Russia's invasion of Ukraine, LNG imports have taken on heightened importance. Chevron is ideally positioned to assist on that front. The oil giants have long been known for their large and stable dividends. At 10 times forward earnings and a 3.3% dividend yield, Chevron is giving investors a solid entry point for 2023.
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