The Blue-Chip Advantage: 7 Stocks for Investors Who Play to Win
If the market’s dramatic shifts this year have left you feeling dizzy, you’re not alone – but blue-chip stocks might be the anchor you need to regain stability. Amidst the current rally (bubble?), we’ve seen stocks rise, plummet, and rise again, pushing investors toward small-caps, tech, and growth stocks. But, while profitable thus far, that might be the wrong move, while blue-chip represents foundational stability sorely lacking within many portfolios.
The economic landscape remains uncertain, far from a clear path to recovery as inflation remains frustratingly above the Fed’s 2% target. Just one adverse event could send speculative stocks tumbling once more. With this in mind, look to these seven blue-chip stocks for stability, value, and decent diversification to protect yourself against the worst of the fallout if (or when) the proverbial shoe drops.
U-Haul (UHAL)
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U-Haul (NYSE:UHAL) dominates the DIY moving and truck rental market, far outpacing competitors like Penske Truck Leasing and Budget Rental with its expansive network of 23,000 locations and a fleet of 200,000 rental trucks.
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But the company often flies under investors’ radar, even those looking for blue-chip stock opportunities. As noted by Barron’s Andrew Bary, “There is virtually no Wall Street coverage of U-Haul. It is run like a private company by the Shoen family, which owns about half the company.”
UHAL is currently valued at an attractive 16x earnings and 1.8x book value. Should the anticipated interest rate adjustments materialize with the Federal Reserve reducing its target rate, we’re likely to see significant activity in the residential housing sector. This makes it one of those blue-chip stocks to consider.
This uptick in housing movement directly benefits U-Haul, as more individuals opt for the cost-effective DIY moving approach. Recent statistics show that only 22% of movers hire a company for their moving needs, while 37.5% choose to rent a truck and move themselves. With household budgets remaining constrained, a decrease in interest rates and an increase in residential relocations are expected to further bolster the preference for DIY moving, underscoring U-Haul’s strategic advantage in the market.
Netflix (NFLX)
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Netflix (NASDAQ:NFLX) is mounting an epic comeback, surging more than 200% following its 2022 slump, reasserting its position as a blue-chip stock. At that time, intense competition and faltering subscription growth dimmed its allure among investors, casting doubt on its status as a former FAANG heavyweight. But this narrative is swiftly shifting as Netflix reclaims its blue-chip media stock spot, underscored by its impressive fourth-quarter earnings report in January.
In a challenging year for consumer cyclicals, marked by tightened household budgets in 2023, Netflix demonstrated its unique position within our media consumption ecosystem. The company reported a 12% increase in overall revenue for the year, while its operating margins rose to 21% from 18%. Furthermore, Netflix welcomed over 13 million new subscribers in the final quarter alone, highlighting the platform’s enduring appeal.
Netflix’s strategy to enforce stricter password-sharing policies has evidently paid off, contrary to fears of alienating users who previously accessed the service through borrowed credentials. Instead, these individuals appear to have transitioned into paying subscribers. Should this pattern persist, Co-CEO Greg Peters’ assertion that curbing password sharing will “support increased conversion of our addressable market in many years to come” could very well materialize, signaling a bright future for Netflix in the competitive streaming landscape.
Intuitive Surgical (ISRG)
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Intuitive Surgical (NASDAQ:ISRG) is a unique choice among blue-chip stocks, perfectly bridging the gap between “hard tech,” robotics, and global healthcare. A member of both the S&P 500 and NASDAQ-100 indices, Intuitive Surgical is lauded as one of the most stable and omnipresent manufacturers of high-end, niche medical hardware. Unlike its competitors, who typically focus on traditional medical hardware like MRI machines and the like, Intuitive Surgical infuses the surgical space with robotics and automation, adopting an innovative, high-growth approach.
As post-pandemic challenges within the healthcare sector ease, Intuitive Surgical is pushing forward with its international expansion efforts. The most recent quarterly update highlighted a significant 21% year-over-year growth in global procedures using Intuitive Surgical’s flagship robotic surgery system, the da Vinci platform, alongside a 14% increase in new da Vinci installations. Supporting its status as a blue-chip MedTech stock, Intuitive Surgical also announced a 17% increase in sales and a substantial rise in net income to $606 million, up from $325 million. All in all, it’s one of those blue-chip stocks to buy.
Watch ISRG stock closely this year as the company anticipates launching its next-generation da Vinci platform shortly. CEO Gary Guthart has teased that this upcoming model will feature “10,000 times the processing power” of existing units, enhancing data collection, sensing capabilities, and overall digital and analytical performance. This marks a significant leap forward in robotic surgery technology and big opportunities for blue-chip MedTech enthusiasts.
Steel Dynamics (STLD)
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Warren Buffett might consider commodity-based companies too risky to be blue-chip stock contenders, but Steel Dynamics’ (NASDAQ:STLD) unique position at an intersection of old-school manufacturing and next-gen sustainability makes it an exception.
Steel Dynamics, recognized as America’s third-largest steel producer, stands out not only for its scale but also for its commitment to sustainable manufacturing. The company’s strong focus on metals recycling enhances its profitability by keeping high-quality metals cycling throughout global value chains, aligning with broader green goals. Offering a compelling 8.14% total yield, STLD attracts value-oriented investors with its appealing valuation. Moreover, the company has a track record of regularly increasing its dividend, with a recent 8% hike to $0.46 per share, marking a consistent rise for five consecutive years and maintaining a 100% quarterly payment rate throughout this period, underscoring its commitment to delivering shareholder value.
In 2023, Steel Dynamics celebrated its second-highest revenue year, with sales reaching $18.8 billion and net income standing at a solid $2.5 billion. Notably, the company demonstrated its dedication to its shareholders by repurchasing 8% of its outstanding shares over the year, a significant investment despite the higher debt costs and the expensive nature of steel production and operations. It’s surely one of those blue-chip stocks to consider for conservative investors.
Taiwan Semiconductor (TSM)
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I tend to avoid most international stocks when looking at top blue-chip stocks (for a range of reasons not worth exploring here), but I make a definite exception for Taiwan Semiconductor (NYSE:TSM) in light of its current position and long-term potential.
While not as beloved as some top blue-chip tech stocks like, arguably, Nvidia (NASDAQ:NVDA), TSMC is well-loved by industry insiders and analysts for its chip manufacturing innovation. The company is integral to the functionality of innumerable modern electronic devices and maintains its position as a leading supplier to the US, despite efforts to bolster American semiconductor production.
TSMC benefits from sovereign investment, such as Japan’s allocation of a portion of its $10 billion aid package to the company, part of a broader initiative to foster regional semiconductor development. The company’s financial health is robust, affirming its blue-chip stock status, characterized by minimal debt and an impressive 40% net margin. TSMC’s fiscal discipline has ensured its stability amidst the fluctuations other stocks face throughout emerging markets, underscoring its potential for extraordinary growth and long-term opportunity.
News Corp (NWSA)
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News Corp (NASDAQ:NWSA) seemingly stands out from our other blue-chip stocks because its industry – legacy media – doesn’t exactly scream “long-term value.” Historically, News Corp relied heavily on newspapers, books, and cable television. But, as American media consumption shifts towards next-generation formats, NWSA stands out for its successful pivot toward those emergent trends.
The push for NWSA’s evolution partly comes from Starboard Value, an activist investor firm that recently acquired a significant stake in the company. Following the investment, NWSA’s quarterly revenue jumped 3% year-over-year, alongside a 94% net income boost. CEO Robert Thomson credits these financial improvements to the company’s strategic move towards digital and subscription revenues, moving away from the unpredictability of advertising revenues.
This approach mirrors the strategy of many software-based blue-chip stocks, which prioritize recurring revenue streams over sporadic, larger payments. For example, NWSA is allocating effort toward digital subscription acquisition instead of high-budget advertising accounts, similar to how Adobe (NASDAQ:ADBE) offers Photoshop subscriptions for a monthly fee rather than a hefty one-time purchase.
This strategic shift is proving fruitful as NWSA also zeroes in on niche markets, notably its Dow Jones segment and digital real estate services, showcasing strong performance. While NWSA currently de-emphasizes dividends to streamline its operations for the digital age, it still maintains a modest 1.55% total yield, balancing operational adjustments with shareholder returns.
Marriott International (MAR)
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Though travel stocks tend to be cyclical and, at times, volatile, there’s no doubting Marriott International’s (NASDAQ:MAR) blue-chip stock status. The stock had a remarkable reversal post-pandemic, but the momentum is only starting to accelerate when you look at the bigger picture.
The hotel giant commands a significant lead globally, holding 17.77% of the international hotel sector, with its closest competitor, MGM Resorts International (NYSE:MGM), trailing at 12.11%.
Marriott is now targeting an up-and-coming customer base to diversify revenue away from pure vacationers and business travel by adapting offerings to appeal to remote and hybrid workers who desire both adventure and the comfort and amenities essential to digital nomads. Marriott is broadening its Courtyard brand to cater to this demographic, including new locations such as Bali and resort destinations, while enhancing existing properties with amenities like adding a lazy river to a Courtyard property in Tennessee.
Looking ahead, Marriott is poised for substantial growth as it continues to extend its global presence and capitalizes on the full return of post-pandemic travel. For value investors, Marriott is a hot stock with a 6.33% total yield, affirming the blue-chip stock’s commitment to growth while ensuring shareholder value.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.
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