Cheap blue-chip stocks refer to companies that are established and have a strong record of delivering solid earnings and returns to investors but have fallen off recently.
They also tend to be market leaders in the sectors in which they compete and have held dominant positions for many years, if not decades.
For these reasons, stocks of profitable blue-chip companies are often the safest investments during times of market volatility and upheaval. The share prices don’t tend to fall as much as unprofitable and unproven stocks that are viewed as being more speculative investments.
Blue-chip stocks also tend to recover faster in periods when the markets rise again. That said, there are plenty of cheap blue-chip stocks that are down 20% or more amid this year’s market rout, presenting attractive entry points for investors.
Here are seven cheap blue-chip stocks to buy before they rebound.
Apple (AAPL)
The consumer electronics giant has not been immune to this year’s market downturn. So far in 2022, Apple (NASDAQ:AAPL) stock has fallen 24% making it one of the best cheap blue-chip stocks to buy. Rather than fret about the selloff, investors should use the decline in the share price to uy Apple stock hand over fist.
Silicon Valley-based Apple remains one of the biggest and best technology companies in the world and it is rare that investors get a chance at such a favorable entry point with the stock.
AAPL stock recently took a big hit after it was reported the company is scaling back production of its newest iPhone. The company cited weakening consumer demand around the world.
However, innovations and market dominance should help Apple weather the current storm. Long-term the company, and its stock, should be just fine.
PepsiCo (PEP)
Snack and beverage company PepsiCo (NASDAQ:PEP) share price is down only 6% year-to-date compared to a 34% decline in the Nasdaq. PEP stock is currently trading 11% below its 52-week high.
The company’s products, which include everything from the Pepsi soft drink and Frito Lay chips to Quaker Oatmeal and the Gatorade sports drink, are considered essential grocery items by the consumers who love them.
In 2021, PepsiCo generated $79 billion in revenue from its food and beverage products. The company barely missed a beat during the Covid-19 pandemic as sales of its consumer products held up remarkably well.
PepsiCo is also managing the current inflationary environment thanks to its pricing power, or ability to raise prices without losing customers.
Plus, PepsiCo pays a dividend that currently yields a strong 2.85% or $1.15 a share each quarter.
In March of this year, PepsiCo announced that it is raising its dividend by 7%, bringing the total increase over the past five years to 43%. The company is also buying back $1.5 billion of PEP stock this year, making it one of the cheap blue-chip stocks to buy with a big future.
Home Depot (HD)
Home Depot (NYSE:HD) is down 31% this year making it one of the hottest cheap blue-chip stocks to buy. Now might be an opportune time to grab HD stock at a deeply discounted price.
Long term, Home Depot is likely to remain a great investment given its dominance of the home renovation and do-it-yourself home repair markets. Even with this year’s decline, Home Depot’s stock has still gained 71% over the past five years.
The second quarter results this year built on the strongest first-quarter sales on record for Home Depot. Looking ahead, Home Depot has stood by its forecast for total and comparable sales to grow by 3% for all of this year.
Visa (V)
Visa (NYSE:V), one of the three largest credit card issuers in the world, currently sits 14% lower than it was trading before the pandemic. It is one of the cheap blue-chip stocks to keep your eyes on, though.
Coming out of the pandemic, with travel and dining out resuming, V stock was expected by many analysts to rebound strongly.
The slow return of higher-margin international transactions on its credit cards has been a drag on the stock.
Visa is also grappling with the loss of its Russian business following that country’s invasion of Ukraine. Yet, despite its current issues, Visa remains a solid investment.
Over the past five years, the stock has returned 67% to shareholders. Visa is currently selling for 27 times this year’s projected earnings, which is rock bottom for the company.
Bank of America (BAC)
Bank of America (NYSE:BAC) looks extremely cheap at its current price. Down 34% on the year amid a broad selloff in all bank stocks, BAC shares are currently trading 39% below their 12-month high, making it one of the cheap blue-chip stocks to buy before they bounce back.
The share price decline doesn’t take away from the fact that Bank of America, the second biggest lender in the U.S., remains a very appealing long-term investment.
Bank of America should perform well going forward as the interest on its variable rate loans resets at higher levels following rate hikes by the U.S. Federal Reserve.
Additionally, Bank of America has improved its deposit base, which now sits at $1 trillion, and has invested significantly in technology to improve its online presence and transactions.
Plus, Bank of America has a big wealth management arm, and its trading unit continues to make hay out of the current stock market volatility. All and all, BAC stock remains a safe bet for investors.
Berkshire Hathaway (BRK.B)
Considered by many to be the ultimate blue-chip stock, Berkshire Hathaway (NYSE:BRK-A, BRK-B) has proven time and again that its share price can outperform the market in any environment.
Still, for now it’s among the cheap blue-chip stocks that have room to run.
Berkshire Hathaway owns a massive portfolio of stocks valued at more than $300 billion.
Buffett’s careful portfolio construction and buy-and-hold strategy has famously carried Berkshire Hathaway through many a market downturn, from the Black Monday crash of 1987 to the dot-com bubble bursting in 2000 and the 2008-09 financial crisis. Each time BRK.B stock has emerged stronger on the other side.
Ford (F)
Shares of legendary automaker Ford (NYSE:F) have been beaten up more than many of the cheap blue-chip stocks this year.
It has seen its share price knocked down 48% year to date.
While the market downturn is to blame, Ford has also been hurt by ongoing difficulties with global supply chains that have made it difficult to source the parts needed for its vehicles, which has, in turn, slowed its production.
Yet, long term there’s plenty to like about Ford and its stock. The company is pushing hard into electric vehicles and has made no bones about the fact that it wants to challenge market leader Tesla (NASDAQ:TSLA) for supremacy in the space.
Electric versions of its iconic vehicles such as the Mustang sports car and F-150 pick-up truck could help the Detroit automaker gain market share and eventually become a global leader in the fast growing EV sector.
— Joel Baglole
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Source: Investor Place