Investors entered 2019 fraught with uncertainty, following a decidedly bearish fourth quarter in which stocks entered correction territory; the status of the 10-year bull market itself was called into question. Although markets quickly rebounded, in recent months the concern reversed from rising rates to declining ones as global growth decelerates and the Federal Reserve’s tools for handling another recession appear vanishingly slim. With 10-year Treasurys yielding just 1.6%, conservative investors have few options, and proven large-cap stocks with robust business models are as good a choice as any. Here are seven of the best blue-chip stocks to buy for the rest of 2019.
While the terms “Target” and “robust business model” might not bubble into consciousness simultaneously, perhaps they should. The big-box retailer is coming off a blockbuster second quarter in which online sales jumped 34%, earnings per share advanced 20%, and management raised full-year EPS forecasts. Back in 2017, the company committed $7 billion to investing in store remodels, same-day order fulfillment and e-commerce in order to compete against Walmart (WMT) and Amazon.com (AMZN) properly. It wasn’t until second-quarter 2019 results came in that this long-term strategy was proven a success, but it emphatically was, and shares jumped by 20% in one day. TGT pays a 2.5% dividend, even after the rally.
Johnson & Johnson
Tired of seeing Johnson & Johnson mentioned as one of the best blue-chip stocks to buy? Well it turns out novelty is not a byproduct of blue-chip investing. JNJ doesn’t offer anything fancy; sales growth has come in essentially flat in 2019, and the company expects between 4% and 6% EPS growth this year. Still, Johnson & Johnson has been considered a reliable blue-chip stock for over a century, and if it weren’t for a stronger dollar, sales would be rising in the mid-single digits internationally right now. JNJ shares offer a 2.9% dividend, and the company’s pharmaceutical division should support the long-term health of the underlying business.
Berkshire’s intrinsic value has been steadily improving over the last few years, and yet shares are essentially unchanged over the last 20 months or so, giving investors the opportunity to buy BRK at its cheapest valuations over that same period. A price-book ratio of 1.29 illustrates Berkshire’s unloved status; there’s an essential valuation floor on BRK shares at 1.2 times book, where Warren Buffett has promised he’ll aggressively buy back shares. Hedge fund star Bill Ackman recently loaded up on Berkshire, reasoning that earnings were dramatically understated in today’s low-rate environment, and that $100 billion in excess cash would soon be put to good use. Historically, that’s proven true.
Why is Walmart one of the best blue-chip stocks to buy for the rest of 2019? Well, if past is prologue, then Walmart will be able to weather any potential recession with relative ease. In 2008, a year without equal in recent memory for bringing financial upheaval to the economy and markets, Walmart sales grew 7.2%, the company raised its dividend by 8%, and shares returned 20% – outperforming the S&P 500 by 58.5 percentage points in a single year. Despite the rise of Amazon, Walmart’s still dominant 11 years later, boasting the highest revenues of any company in the world at $514 billion last year.
After years of underperformance, AT&T shares are finally on the up-and-up – and they’re gaining ground in what looks to be a sustainable longer-term pattern. Telecom is one of the most resilient sectors in times of uncertainty, and entertainment is also largely recession-proof; AT&T has a much larger exposure to that sector after its $85 billion acquisition of Time Warner closed in 2018. Now the proud owner of networks like HBO, CNN, TNT and others – in addition to Warner Brothers itself – the company is aggressively paying down debt. T stock’s 5.8% dividend is second to only Royal Dutch Shell (RDS/A) among mega-cap stocks, and as the yield curve flattens and interest rates slowly fall again, that high dividend yield is becoming more and more irresistibly alluring to investors.
The latter half of 2019 may be a good time to buy blue-chip consumer goods stocks like PepsiCo – companies in the business of selling low-cost consumer staples with a track record of steady demand in good economic times and bad. Appearing modestly valued when compared to its rival Coca-Cola (KO), PEP shares trade at 16 times earnings to KO’s multiple of 32. That doesn’t mean PEP is half-off right now – Coca-Cola’s revenue growth was 6% compared to 2% for PepsiCo last quarter – shares of the food and beverage giant still look appealing. Pepsi’s food and snack holdings, which include Frito-Lay and Quaker Foods, help diversify and differentiate its business from KO. Shares pay a 2.9% dividend.
How can anyone compete with the dollar menu when the economy is struggling? One of the strongest blue-chip stocks to buy for the rest of 2019 has to be McDonald’s, which boasts one of the world’s most profitable brands and efficient fast-food operations. In 2008, MCD shares outperformed the S&P 500 by 47 percentage points as operating income advanced by 17%. More recently, CEO Steve Easterbrook has proven a brilliant executive, with shares soaring over 140% since assuming the reins in March 2015. His moves included adding an all-day breakfast menu, investing heavily in digitizing the business, and a recent strategy of “refranchising,” selling corporate-owned stores to franchisees to lower cost structures and boost long-term margins.