Blue-chip stocks all have common denominators that set them apart from other, lesser stocks. They tend to be big, successful businesses that consumers and investors hold in high regard. Their financial statements are typically exemplary, indicating a level of consistency and stability that can allow shareholders to sleep soundly.
Look over the higher-end market caps of S&P 500 stocks and you’ll get a sense of the companies referred to as “blue-chip.” And what you’ll see that they are doing pretty well.
So far in 2024, blue chip stocks are outperforming both the broad-based index and the small-cap Russell 2000 index. For example, the Fidelity Blue Chip Growth ETF (NYSEMKT:FBCG) is up over 16% year-to-date versus 9% for the S&P 500 and less than 2% for the small-cap index.
Finding the best blue-chip stocks to buy could be as easy as buying an exchange-traded fund (ETF). You get instant diversification at a relatively low cost. The Fidelity ETF has an expense ratio of just 0.48% and gives you access to over 300 blue-chip stocks.
But as stock pickers, I like to think we can do better. Below are three blue-chip stocks that are currently undervalued and should provide your portfolio with a fine balance of growth and income.
Apple (AAPL)
Shares of Apple (NASDAQ:AAPL) are down 5% in 2024 and until last week were sitting down more than 13%. Slowing sales in China, iPhone sales not lighting any fires and lagging development in artificial intelligence (AI) all conspired to depress the tech stock’s shares.
Yet it just held an iPad event that promises to reignite tablet sales. It has also been deemphasizing China while moving forcefully into India. Weaning itself away from China into more emergent markets could light that fire investors are looking for. An upcoming developers conference bodes well for AI becoming a force for the tech stock as well as the newest iteration of the iPhone. It promises to be feature-rich in AI.
And the reason Apple stock bounded higher last week was its announcement of a massive $110 billion share buyback plan. The tech company has so much cash sitting on its balance sheet it doesn’t know what to do with it. While stock repurchases artificially juice earnings per share, it can also signal management’s belief its own stock is undervalued.
Apple stock still trades at a premium of 28 times trailing earnings and 7x sales, but as the industry leader, it deserves its premium. With the catalysts outlined above, this blue-chip stock should soon be running higher again.
Anheuser-Busch InBev (BUD)
Although U.S. beer sales continue to slow, Anheuser-Busch InBev (NYSE:BUD) remains an industry behemoth with a vast, global reach. Its recent earnings report indicates just how resilient it can be because of its far-flung operations.
Even as volumes continue falling in the U.S., due in part to A-B’s ill-advised decision to wade into the cultural wars, it showed its strength elsewhere. Volumes jumped by mid-single digits in Latin America core brands including Modelo and Pacifico, driving higher sales in Mexico. Corona did likewise in Brazil.
Constellation Brands (NYSE:STZ) reaps all the benefits of the Modelo and Corona momentum in the U.S., as BUD sold the domestic rights to the brands to gain passage of its acquisition of the brewer. However, A-B retains them elsewhere in the world.
Anheuser-Busch reported a 5% increase in EBITDA to $4.9 billion, which was well above Wall Street’s estimates, while profit margins expanded 90 basis points.
As happened with Apple, shares of A-B jumped on the good news, easing some of the losses experienced in 2024. BUD stock is down less than 3% this year and at less than 2x sales, it is a historically low valuation. These are levels not seen in over a decade, except for during the pandemic. It marks an excellent time to buy this brewer’s blue-chip stock.
Toyota Motor (TM)
Toyota Motor (NYSE:TM) is redefining the global auto industry with its big bet on hybrid vehicles. When the rest of the world was going all-in on all-electric cars, Toyota hedged its bets with hybrids. It believed consumers would want the reliability of a gas-powered engine to support an electric option. Its choice proved right.
While battery-electric vehicle (BEV) growth is dramatically slowing, hybrid sales are exploding. Toyota saw a dramatic 20% surge in first-quarter sales volume. It says EVs now account for 36.6% of its total sales.
Overall, though, the Japanese automaker’s vehicles are proving popular. That’s led to it having to use fewer incentives to get buyers to purchase, which improves Toyota’s bottom line. It is also building more factories in more countries, which will help it offset currency exchange rate effects now that the Japanese yen is so strong. Foreign exchange impacts were in part the reason Toyota guided toward a 20% decline in operating profits for the full year.
Toyota’s compact, fuel-efficient and forward-thinking vehicles have struck a chord with car buyers. Until battery technology catches up with buyer demand, Toyota is investing in new solid-state battery technology. This gives them the ability to purchase fossil-fuel-powered options is a smart strategy.
Toyota stock is up 24% year-to-date and 61% higher over the past year. Yet shares still trade at less than 10 times earnings and estimates and at a fraction of sales. While that’s in line with its U.S. counterparts, Toyota Motor sales exhibit robust strength. That makes it the blue-chip stock to buy.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.