The Best Blue Chip Stocks of January 2024
Stock (ticker) | Market Capitalization |
---|---|
Apple Inc (AAPL) | $2.8 trillion |
JP Morgan Chase & Co. (JPM) | $496 billion |
Walmart Inc. (WMT) | $425 billion |
Johnson & Johnson (JNJ) | $387 billion |
Procter & Gamble Co. (PG) | $350 billion |
AbbVie Inc. (ABBV) | $285 billion |
Coca-Cola Co. (KO) | $258 billion |
Nike Inc. (NKE) | $156 billion |
Honeywell International Inc (HON) | $135 billion |
Goldman Sachs Group Inc (GS) | $125 billion |
Apple Inc (AAPL)
Market Cap
$2.8 trillion
10-Year Avg. Annualized Return
26.5%
Forward P/E Ratio
28.1
$2.8 trillion
26.5%
28.1
Why We Picked It
With a market cap of about $3.029 trillion, Apple is the largest public company in the world. Climbing to this valuation has brought investors lucrative gains. The company has the best annualized return over the past decade of any stock on this list.
However, this is not exactly cheap—AAPL’s forward P/E ratio is the highest on our list. But it’s well off its most recent highs, as this key ratio rose above 40 during the pandemic.
Apple’s current valuation is due to the fact that the stock has gained nearly 50% year-to-date. It’s now trading close to its most recent all-time high.
AAPL stock priceby TradingView
JP Morgan Chase & Co (JPM)
Market Cap
$496 billion
10-Year Avg. Annualized Return
14.5%
Forward P/E Ratio
12.1
$496 billion
14.5%
12.1
Why We Picked It
Banking giant JP Morgan has offered investors the highest shareholder yield of any company on this list. The share price has also performed strongly, despite a 40% decline in the final quarter of 2022. This drop was among the steepest of the stocks included on this list.
JPM’s forward P/E ratio is the second lowest on our list. It’s also below the five-year average, suggesting the stock is priced to buy right now.
JPM stock priceby TradingView
Walmart Inc (WMT)
Market Cap
$425 billion
10-Year Avg. Annualized Return
9.5%
Forward P/E Ratio
24.8
9.5%
24.8
Why We Picked It
Walmart is the biggest bricks-and-mortar retail company in the U.S., claiming around a quarter of the total market.
Investors may balk at this stock’s P/E ratio, especially given the size of the premium compared to rivals such as Target. However, this ratio was as high as 43.7 in October 2022, and above 50 the prior year, meaning the current mark could historically be considered low.
The stock’s biggest strength may also lie in its stability. While its average annual return over the past decade has lagged the S&P 500’s annualized return, WMT’s return profile has been steady. Despite unfavorable macro conditions, the stock fell less than 2% in 2022, compared to the S&P 500, which dropped almost 20%.
WMT stock priceby TradingView
Johnson & Johnson (JNJ)
Market Cap
$387 billion
10-Year Avg. Annualized Return
8.8%
Forward P/E Ratio
16.6
$387 billion
8.8%
16.6
Why We Picked It
Johnson & Johnson is one of the largest healthcare stocks in the world, developing medical devices, pharmaceuticals and consumer packaged goods.
JNJ has performed well over the past decade. But it’s the company’s dividend that really stands out. In October, it announced its 63rd consecutive increase to the quarterly dividend.
The stock’s pullbacks have been very manageable. The 21% decline at the start of the Covid-19 pandemic—one of its steepest declines from the past decade—was the smallest of the companies included on our list.
Johnson & Johnson’s forward P/E gives it about the cheapest current valuation of our picks for the best blue chip stocks.
JNJ stock priceby TradingView
Procter & Gamble Co (PG)
Market Cap
$350 billion
10-Year Avg. Annualized Return
9.4%
Forward P/E Ratio
23.7
$350 billion
9.4%
23.7
Why We Picked It
Multinational consumer goods producer Procter & Gamble specializes in personal care and hygiene products.
In the company’s April 2023 Q1 results, PG revealed that, although it has seen rising input costs, it nonetheless boosted profit margins for the first time in more than two years. The company raised prices by close to 10%, which helped generate a 4.1% increase to net sales—all despite sales volume falling 3%.
This pricing power has led to strong cash flow, with shareholders benefitting through consistent dividends.
This has all combined to give PG a defensive return profile. A five-year beta of 0.39 sums up the company’s steady attributes. The stock is currently trading close to its all-time high, despite seeing only a small rise year-to-date.
PG stock priceby TradingView
AbbVie Inc (ABBV)
Market Cap
$285 billion
10-Year Avg. Annualized Return
16.7%
Forward P/E Ratio
16.0
$285 billion
16.7%
16.0
Why We Picked It
Pharmaceutical company AbbVie Inc is a blue chip stock, although shares of the maker of the rheumatoid arthritis drug Humira have performed poorly in 2023.
On the flipside, ABBV gained 19% in 2022, vastly outpacing the rest of the market, with the S&P 500 down more than 19%.
ABBV’s dividends are where the company shines as a blue chip stock. The five-year average dividend yield is 4.4%, and the company has hiked dividends for over 50 consecutive years.
Its P/E ratio doubled from July 2022 to April 2023, and at that time was the highest on our list. However, when you consider future earnings, things look a little more optimistic. ABBV’s forward P/E ratio is the third-lowest of the stocks included here.
ABBV stock priceby TradingView
Coca-Cola Co (KO)
Market Cap
$258 billion
10-Year Avg. Annualized Return
7.3%
Forward P/E Ratio
23.5
$258 billion
7.3%
23.5
Why We Picked It
Coca-Cola is the quintessential blue chip stock, a drinks company that has demonstrated decades of consistent dividends and stable performance.
However, KO’s average return over the past decade is the worst on this list. Looking forward, the company is trading at a P/E ratio that is toward the top of its five-year range, meaning it does not stand out from a valuation perspective.
Despite these factors, Coca-Cola’s low beta combined with its dividend yield means it fits the bill of what many investors see in blue chip stocks: lower risk and steady returns.
The stock demonstrated this in 2022, rising about 10% while fell 18%.
KO stock priceby TradingView
Nike Inc (NKE)
Market Cap
$156 billion
10-Year Avg. Annualized Return
11.3%
Forward P/E Ratio
26.5
$156 billion
11.3%
26.5
Why We Picked It
Sports giant Nike has shown tremendous growth for many years, fighting its way to the top of the market since going public in 1980.
Over the past 10 years, NKE’s average annual return has been the fourth-highest on this list and better than the S&P 500 benchmark.
In the last two years, however, the stock has lagged. It currently trades significantly lower than its all-time high from November 2021.
This has made it cheaper, though. NKE’s P/E ratio is comfortably below its five-year average of 46.7, and increased earnings forecasts mean the forward P/E ratio is lower again.
NKE stock priceby TradingView
Honeywell International Inc (HON)
Market Cap
$135 billion
10-Year Avg. Annualized Return
11.4%
Forward P/E Ratio
20.6
$135 billion
11.4%
20.6
Why We Picked It
Conglomerate Honeywell International is exposed to many different sectors and tends to closely track the performance of the wider market. The company is formally designated as an industrial stock.
HON has averaged a solid annual return compared to the S&P 500 over the past decade. Adding to its appeal for dividend investors is its current yield, which is well above the benchmark index’s yield.
The stock currently trades at its lowest P/E ratio since 2019, while its forward P/E ratio is even cheaper.
HON stock priceby TradingView
The Goldman Sachs Group Inc (GS)
Market Cap
$125 billion
10-Year Avg. Annualized Return
10.1%
Forward P/E Ratio
11.2
$125 billion
10.1%
11.2
Why We Picked It
The second-largest investment bank in the world by revenue, Goldman Sachs stock fell 8% in 2022 as the Federal Reserve tightened monetary policy amid rampant inflation.
Going back to 2021, GS’s peak-to-trough decline of 33% is among the largest declines of companies included on this list. Despite this, over a long-term horizon, Goldman Sachs has performed strongly, generating a strong average return over the past decade.
Its total shareholder yield is also the second-highest on this list, buoyed by a strong dividend yield.
From a valuation perspective, GS’s forward P/E ratio is currently toward the top of its range. Its P/E average over the last 5 years comes in at 10.3.
GS stock priceby TradingView
*All analysis and data are sourced from StockRover.com, current as of January 4, 2024.
Methodology
Our picks for the best blue chip stocks were selected with an eye to reliable earnings, growing dividends, strong returns and reasonable valuations. The stocks outlined above are traded on U.S. exchanges and meet the following requirements:
- High market capitalization and annual revenue. Each stock has a market cap of at least $75 billion and revenue last year over $20 billion.
- Steady profits. The companies have delivered positive earnings for at least seven years.
- Growing dividends. The companies have paid steady and increasing dividends over the past decade.
- Limited price pullbacks. Each stock has not experienced a sustained decline of more than 50% in the past 10 years. For reference, 92% of North American stocks have had a price drop bigger than 50% within the past decade. With few stocks meeting this criteria, it’s an excellent measure of historical stock price stability.
- Impressive 10-year returns. All stocks listed appreciated by at least 50% over the past decade
- Shareholder yield greater than zero. Shareholder yield is a combination of dividends, share buybacks and share issuance. Negative numbers mean the company is increasing the shares outstanding and diluting shareholders.
- Reasonable valuations. For our picks, reasonable means a P/E ratio and forward P/E ratio below 40 and 35, respectively. Buying stocks at lower P/E levels tends to produce better returns over time. And while P/E levels may gradually rise, that is not necessarily a signal to sell a stock, assuming the other criteria remain solid.
To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products.
Please note that the stocks above were selected by an experienced financial analyst, but they may not be right for your portfolio. Before you decide to purchase any of these stocks, do plenty of research to ensure they are aligned with your financial goals and risk tolerance.
I'm a seasoned financial analyst with a deep understanding of the stock market and investment strategies. Over the years, I've closely followed market trends, analyzed company performance, and advised on investment opportunities across various sectors. My expertise extends to evaluating financial metrics, assessing risk factors, and identifying blue-chip stocks with strong fundamentals and growth potential.
Now, let's delve into the concepts used in the article "The Best Blue Chip Stocks of January 2024":
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Market Capitalization (Market Cap): This is the total value of a company's outstanding shares of stock. It's calculated by multiplying the current market price of one share by the total number of outstanding shares.
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10-Year Avg. Annualized Return: This metric measures the average annual return on investment over a 10-year period, adjusted for compounding. It provides insights into the historical performance of a stock or investment.
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Forward P/E Ratio: The Price-to-Earnings (P/E) ratio is a valuation metric calculated by dividing the current market price of a stock by its earnings per share (EPS). The forward P/E ratio uses estimated future earnings instead of historical earnings to gauge the stock's valuation.
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Dividends: Dividends are payments made by a company to its shareholders as a distribution of profits. They are typically paid out regularly (e.g., quarterly) and can be a source of income for investors.
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Shareholder Yield: This metric encompasses dividends, share buybacks, and share issuance, providing a comprehensive view of the returns that shareholders receive from owning a particular stock.
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Beta: Beta measures the volatility of a stock relative to the overall market. A beta greater than 1 indicates that the stock is more volatile than the market, while a beta less than 1 suggests lower volatility.
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Price Pullbacks: A price pullback refers to a temporary decline in the price of a stock or market index after a period of upward movement. It's often seen as a buying opportunity by investors looking to enter or add to their positions.
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Revenue: Revenue is the total amount of money generated by a company from its business activities, such as sales of goods or services, before any expenses are deducted.
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Earnings: Earnings, also known as net income or profit, represent the company's total revenue minus expenses and taxes. It's a key measure of a company's profitability.
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Valuation: Valuation refers to the process of determining the intrinsic value of a company or asset. It involves analyzing various financial metrics, market trends, and future prospects to assess whether a stock is overvalued, undervalued, or fairly priced.
These concepts are crucial for understanding the performance and valuation of stocks, as well as making informed investment decisions tailored to individual financial goals and risk tolerance levels.