Blue-chip stocks: quality over quantity.
Stocks remain the best asset class to invest in for long-term returns, but not every investor can bear the anxiety that comes with bear markets like the 2008-2009 financial crisis. The best blue-chip stocks to buy for 2018 can anchor your portfolio and give you some peace of mind. After a nine-year rally, investors can protect their downside potential by buying large, diversified, quality businesses with long track records of excellence, world-renowned brands, and a willingness to pay dividends. Here are seven of the best blue-chip stocks to buy for 2018.
Apple Inc. (Nasdaq: AAPL)
Apple is a must-own in most diversified portfolios and is extremely well-positioned to be the world's first $1 trillion company. What's more, it's become obsessed with returning cash to shareholders through share buybacks and dividends and trades at just 14 times forward earnings. The iPhone X, the first smartphone Apple's had the gumption to charge $1,000 for, finally debuted to strong demand in December, so Apple's holiday earnings could be quite impressive. There are only a few no-brainers in the stock market, and at the moment, AAPL is one of them -- which is doubly true should tax reform be passed.
Goldman Sachs Group Inc (GS)
There are 688 companies worth more than $10 billion, but only 30 of them have the following qualities: a price-earnings ratio less than 20, a forward P/E below 15, positive trailing five-year sales growth, revenue growth last quarter and EPS growth expected to exceed 10 percent for the next five years. These 30 high-quality stocks are all reasonably valued, well-managed and still growing -- and Goldman was among them. With rising rates and an opportunity to underwrite some of Saudi Aramco's anticipated record-setting $100 billion initial public offering next year, GS earned its spot among the best blue-chip stocks to buy for 2018. Bank stocks as a whole are also poised to outperform next year.
Walgreens Boots Alliance Inc (WBA)
The best time to buy a stock is when a good company gets unfairly sold by Wall Street, which is what happened to WBA in 2017 as rival CVS (CVS) agreed to acquire Aetna (AET). With WBA off 13 percent, Mr. Market curiously dismissed Walgreen's savvy acquisition of 1,932 Rite-Aid (RAD) locations, which strengthened its position in the drugstore oligopoly. Recently, WBA also bought a 40 percent stake in China's biggest retail pharmacy chain for just $418 million. With shares paying a 2.2 percent dividend and a string of recent insider purchases, unnecessarily pessimistic sentiment has made WBA one of the best blue-chip stocks to buy for 2018.
Visa Inc (V)
Visa embodies the ethos of the blue-chip stock. It's one of the 15 most valuable public companies, enjoys huge market share in a consolidated yet growing industry, is highly profitable and enjoys high barriers to entry. Visa is the global market share leader in credit cards and, in the U.S., has 323 million active accounts to MasterCard's (MA) 191 million. It's tough to go wrong with a company whose margins increase every time people swipe a little more plastic. Plus, while its 0.8 percent dividend might not be much, it's been growing for eight years; Visa will be free to return more money to shareholders after tax cuts pass.
Medtronic PLC Ordinary Shares (MDT)
While Medtronic likely won't be posting wild growth numbers anytime soon, the sprawling $110 billion medical technology company is still one of the best blue-chip stocks to buy for 2018. That's because MDT prizes the long term over the short term, as illustrated by its $6.1 billion 2017 sale of several business lines to Cardinal Health (CAH). The deal will decrease fiscal 2018 EPS but boost long-term revenue growth and margins, and eventually EPS will benefit as well. With MDT using the proceeds to buy back stock and pay down debt as rates rise, investors can also consider this 2.2 percent dividend payer a low-volatility portfolio hedge should recession hit.
Texas Instruments Inc (TXN)
Founded in 1930, TXN is worth $100 billion today. Because the company is still growing at a healthy clip, analysts expect revenue to increase 11.8 percent and EPS to rise 31 percent in fiscal 2017. Not only is TXN a leading supplier to the rapidly transforming automotive and industrial sectors, it also boasts a great track record of dividend growth; TXN has raised its dividend for 13 consecutive years, at a compound annual growth rate of 29 percent. It's also intent on reducing the share count through buybacks, trimming its share count from 1.77 billion in 2004 to 1 billion in 2017. Few other stocks offer a 2.5 percent dividend and such attractive growth.
Pfizer Inc. (PFE)
Last and certainly not least of the best blue-chip stocks to buy for 2018: Pfizer. Founded in 1849, Pfizer is currently worth about $215 billion. PFE stock pays a hard-to-find, sustainable 3.5 percent dividend, which is roughly 50 percent more than rival Johnson & Johnson's (JNJ) 2.4 percent yield. While Pfizer doesn't currently look like much of a growth stock (few pharmas this size are), its pipeline is impressive: PFE is waiting for FDA approval on nine drugs and has 28 treatments in late-stage clinical trials. Importantly, the stock is also resilient to market pullbacks, making it unlikely to lose as much as the Standard & Poor's 500 index in a crash.
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