In this article, we discuss the 10 affordable blue chip stocks to buy now.
The stock market is not easy picking right now even for the most experienced investors on Wall Street. The S&P500, down 21.74% in the year so far, fell further into bear market territory, sliding for the fifth straight day on Tuesday. The 10-year Treasury yield rose to its highest level since April 2011, showing an increment of 11 basis points to touch 3.483%. The 2-year yield gained approximately 16 basis points to reach 3.437%, a 15-year high. Yields move in the opposite direction to stock prices, and this two-way battering in the stock market has exacerbated as investors prepare for the Fed’s interest rates hike this week, with many betting on a massive 75 basis points increase. This comes as experts fear inflation hasn’t topped, with CPI (consumer price index) figures for May showing year-on-year growth of 8.6%, the biggest increase in almost 41 years. All this comes on top of soaring energy prices, and geopolitical tensions emanating from the Russia-Ukraine crisis dampening investor sentiment around the world.
Still, the stock market needs investors, and investors need high quality, affordable stocks to put their money into. That’s why, we’ve prepared a list of the 10 affordable blue chip stocks to buy now, which includes names such as The Coca-Cola Company (NYSE:KO), Bank of America Corporation (NYSE:BAC), and Shell plc (NYSE:SHEL), along with others mentioned below. Blue chip stocks have a solid track record of posting market-beating returns and their huge market capitalizations make them less susceptible to the most violent throes of market volatility. These stocks also often make stable dividend payments, making their ownership a safe bet in the most stressed of economic climates.
Our Methodology
Affordable Blue Chip Stocks To Buy Now
10. Barclays PLC (NYSE:BCS)
Number of Hedge Fund Holders: 16
Share Price (as of June 13): $7.74
Barclays PLC (NYSE:BCS) is one of the largest diversified banking firms in the world. The London-based company was founded in 1690, and offers a range of financial services including credit cards, retail banking, wholesale banking, wealth management, and investment management services.
On May 19, Keefe Bruyette analyst Edward Firth upgraded Barclays PLC to ‘Outperform’ from ‘Market Perform’ with a revised price target of 230 GBp, up from 210 GBp. The analyst noted that the bank’s performance is good, and the risk factors are already priced into the shares at current levels. As of June 13, Barclays PLC offers an impressive yield of 4.17%, and has paid shareholders dividend payouts since 1986.
For 2021, Barclays PLC posted an annual revenue of $30.17 billion, showing a 7.95% increase from its 2020 revenue of $27.94 billion. The firm reported a revenue of $8.1 billion for Q1 2022, above estimates by $832.7 million.
Banks tend to do well during periods of inflation and rising interest rates, and investors were understandably seen snapping up on Barclays PLC shares. At the close of March, 16 hedge funds were stakeholders in the company, as compared to 11 hedge funds a quarter earlier. The total value of Q1 hedge fund holdings stood at $121.4 million. Barclays PLC’s (NYSE:BCS) largest shareholder in the first quarter was Masters Capital Management with a $39.5 million stake, up 25% from the previous quarter.
Just like The Coca-Cola Company, Bank of America Corporation, and Shell plc (NYSE:SHEL), Barclays PLC ranks as one of the best, and most affordable blue chip investments to make today.
9. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 19
Share Price (as of June 13): $61.31
BHP Group (NYSE:BHP) deals in the mining, production and supply of oil, natural gas, iron ore, uranium, gold and coal products around the world. The firm operates in more than 90 countries around the world including United States, Canada, Chile, and Australia, where it is headquartered. BHP Group offers an impressive yet sustainable yield of 11.51% as of June 13, and has grown its dividend payments for 5 years in a row.
BHP Group’s (NYSE:BHP) annual revenue for 2021 stood at $60.8 billion, representing a jump of 41.66% from its 2020 revenue of $42.9 billion. As of June 13, the company shares have registered an uptick of 17.39% in the last 6 months, and 12.99% so far in 2022.
Goldman Sachs analyst Paul Young on June 1 reinstated coverage of BHP Group with a ‘Buy’ rating and a price target of A$51.20. The analyst cited an attractive valuation and upside from copper growth, following the merger of BHP’s oil and gas portfolio with Woodside to establish an independent energy company. Young notes that the company has traded at a premium to global mining peers over the last decade, and he expects this trend to persist.
As of the end of the first quarter, 19 hedge funds were bullish on BHP Group, with combined stakes worth $2.24 billion. This is in comparison to 25 hedge funds in the previous quarter. Fisher Asset Management was the firm’s largest Q1 shareholder, with a $1.3 billion stake consisting of 16.9 million shares, showing an increase in stake of 117% over the previous quarter.
Harding Loevner, an investment management firm, mentioned BHP Group in its Q1 2021 investor letter. Here’s what the fund said:
“Our purchase of Australian mining company BHP is an example of a quality company at a moderate valuation that should deliver attractive long-term returns. We believe the market has undervalued its enduring competitive advantage due to its low cost iron and copper mining operations which has allowed the company to deliver consistent profits and cash flows across the inevitable ups and downs of the global metals cycle. While the variability of commodity prices prevents BHP from scoring in the top ranks of measured quality, we are willing to bear some of that uncertainty in return for a more attractive valuation given the company’s strong business fundamentals.”
8. American Airlines Group Inc. (NASDAQ:AAL)
Number of Hedge Fund Holders: 28
Share Price (as of June 13): $13.50
American Airlines Group Inc. (NASDAQ:AAL) is the world’s largest airline, considering the number of passengers carried and its fleet size, which stood at 865 aircrafts at the start of 2022. The Covid pandemic was perhaps the toughest on the airline industry, and American Airlines Group Inc. had to accept government aid after losing billions in a matter of months. With global travel accelerating back to pre-pandemic levels, a dominant name like American Airlines is well-poised in the market to post healthy gains.
On April 22, Argus analyst John Staszak upgraded American Airlines Group Inc. to ‘Buy’ from ‘Hold’, with a $24 price target. Staszak sees the stock as “favorably valued,” and expects it to benefit from an acceleration in business and international travel, as well as management’s efforts to reduce cost.
For Q1 2022, American Airlines Group Inc. disclosed EPS of -$2.32, exceeding estimates by $0.08. Revenue increased 122% in comparison to the year-ago quarter, standing at $8.9 billion and outperforming Street estimates by $77.16 million.
28 hedge funds owned $474.8 million worth of positions in American Airlines Group Inc. at the close of Q1 2022, down from 30 hedge funds a quarter ago with $1.09 billion worth of stakes in the firm.
7. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 37
Share Price (as of June 13): $56.27
Shell plc (NYSE:SHEL) is a London-based energy company which deals in oil, natural gas, natural gas liquids, petrochemicals, and renewable energy services around the world. At $56.27, the company shares are trading at a significant discount in comparison to US rivals Exxon and Chevron.
The company’s revenue for the first quarter showed year-on-year growth of 51.3%, coming in at $84.2 billion, above analysts’ expectations by $39.36 billion. EPS of $2.40 also beat consensus estimates by $0.21. Shell plc (NYSE:SHEL) also pays a healthy dividend yield of 3.57% as of June 14.
On June 9, Credit Suisse analyst Amy Wong initiated coverage of Shell plc (NYSE:SHEL) with an ‘Outperform’ rating, along with a price target of 3,000 GBp. The energy company stands as Wong’s top pick in the European integrated energy sector, with the analyst noting that its strategic response to the energy transition is not reflected in the current share price. She stated that Shell’s energy transition strategy ranks as the most progressive in terms of decarbonization, and for generating strong cash flows that support its dividend payments in the near and medium term.
Grantham Mayo Van Otterloo & Co. LLC, an asset management firm, mentioned many stocks in its Q1 2022 investor letter, and Shell plc (NYSE:SHEL) was one of them. It said:
“The market is simply not valuing resource companies at reasonable levels given any plausible base case for how the world might play out, in our opinion. With oil prices up around 65% and natural gas prices up hundreds of percent since the beginning of 2020, Shell (NYSE:SHEL), a bellwether for the oil and gas industry, is more or less flat. With the movement in oil and gas prices, one would have expected Shell’s stock price to surge. It didn’t, however, leaving Shell at very attractive valuation levels. At commodity prices as of the end of the first quarter, Shell would be cranking out free cash flow yields of 22-23% for the next few years according to our models.”
6. AstraZeneca plc (NYSE:AZN)
Number of Hedge Fund Holders: 45
Share Price (as of June 13): $60.02
AstraZeneca plc (NYSE:AZN) ranks next on our list of affordable blue chip stocks to buy, along with names such as The Coca-Cola Company, Bank of America Corporation, and Shell plc (NYSE:SHEL). The biopharmaceutical giant based in Cambridge, United Kingdom, makes and sells prescription medicines for a range of diseases. It made windfall profits from its Covid-19 vaccine, totaling $4 billion in 2021.
On May 24, Danske Bank analyst Caroline Baner initiated coverage of AstraZeneca plc (NYSE:AZN) with a ‘Buy’ rating and a 13,100 GBp price target. She sees “durable” growth drivers and visibility through 2030, and notes that AZN’s medicines in oncology, rare diseases and collaboration projects hold exclusivity in the US through 2030 and offer potentially significant sources of revenue.
Investors were seen loading up on AstraZeneca plc (NYSE:AZN) stock. At the end of March, 45 hedge funds were long on the company shares, as compared to 42 hedge funds a quarter earlier. With a $1.38 billion stake consisting of 20.84 million shares, Fisher Asset Management was the top shareholder of AstraZeneca plc (NYSE:AZN) in the first quarter of 2022.
For Q1 2022, AstraZeneca plc (NYSE:AZN) posted revenue of $11.39 billion, up 55.60% from the year-ago quarter and beating estimates by $423.24 million. As of June 14, the company offers a yield of 4.03%, and has paid a dividend since 1999.
Here is what Baron Funds, an investment management firm, had to say about AstraZeneca PLC (NYSE:AZN) in its Q1 2022 investor letter:
“AstraZeneca PLC is a pharmaceutical company developing products across a range of indications including oncology, cardiovascular, and respiratory. AstraZeneca is widely recognized as having the best top-line and bottom- line growth profiles in the pharmaceutical space without a discernable patent cliff this decade. Given consistent new product outperformance (Calquence and Enhertu are recent examples), we expect continued share appreciation as AstraZeneca’s financials compound.”
5. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 49
Share Price (as of June 13): $35.30
Ally Financial Inc. (NYSE:ALLY) is a digital financial services company which offers banking, investing and loan services related to mortgages, auto finance, and corporate finance.
Raymond James analyst David Long on April 18 lowered the firm’s price target on Ally Financial Inc. to $50 from $57 and maintained an ‘Outperform’ rating on the company shares. Although Q1 results were “mixed” on account of lower fee income and elevated operating expenses, the analyst is pleased with the firm’s strong loan growth, net interest margin expansion, and capital return. Ally Financial Inc. has grown its dividend payout for 5 years in a row, with a 3.52% yield as of June 14.
For the quarter ending March, Ally Financial Inc.’s (NYSE:ALLY) revenue stood at $2.14 billion, above estimates by $2.97 million. EPS of $2.03 also outperformed estimates by $0.10.
Out of the 900+ hedge funds in the database of Insider Monkey, Ally Financial Inc. stock was reported in the portfolios of 49 hedge funds at the end of the first quarter, as compared to 48 hedge funds a quarter ago. The aggregate value of the Q1 hedge fund holdings stood at $2.43 billion. Berkshire Hathaway initiated a $390 million position in Ally Financial Inc. in the first quarter, making it the firm’s second largest shareholder behind Harris Associates, which held a $1.15 billion stake in the company.
4. Antero Resources Corp (NYSE:AR)
Number of Hedge Fund Holders: 53
Share Price (as of June 13): $43.35
Antero Resources Corp (NYSE:AR) is an energy company based in Colorado, which deals in the production and marketing of oil, natural gas, natural gas liquids across the United States. The company has surged 174.86% in the last 12 months, and 114.55% in the year to date as of June 14, positioning it as one of the best affordable blue chip stocks to buy with shares priced at roughly $43.
Hedge fund sentiment was up on Antero Resources Corp in the first quarter of 2022, where 53 hedge funds were stakeholders in the company with combined positions worth $1.37 billion. In comparison, 46 hedge funds owned stakes in the energy company a quarter ago.
On April 25, Raymond James analyst John Freeman kept a ‘Strong Buy’ rating on Antero Resources Corp shares, and bumped the price target to $52 from $38. The company remains Freeman’s favorite natural gas/natural gas liquids exposed stock, who sees an improved free cash flow outlook as a result of the rise in energy prices.
3. Teck Resources Ltd (NYSE:TECK)
Number of Hedge Fund Holders: 56
Share Price (as of June 13): $40.15
Teck Resources Ltd (NYSE:TECK) is a mining company which deals in the production and supply of gold, copper, lead, steelmaking coal, and silver, as well as other metals, chemicals and fertilizers. Rising commodity prices position the company very well heading into the future, and in the last 12 months it has gained 79.95% as of June 14.
Deutsche Bank analyst Abhi Agarwal on June 9 reiterated a ‘Buy’ rating on Teck Resources Ltd shares, and bumped the price target to $52 from $48. The analyst noted, after meeting with company management, that the company is on “is on the cusp of a major shift” as the Quebrada Blanca Phase 2 project, one of the world’s largest undeveloped copper resources, starts delivering which will drive an increase in free cash flow generation. He also sees the company’s portfolio shifting from being primarily a met-coal miner to a base metal miner by 2025, which should drive a re-rating of the stock.
Investors were eager on Teck Resources Ltd in the first quarter, where 56 hedge funds reported ownership of positions in the company, as compared to 40 hedge funds a quarter earlier. Its largest shareholder in the first quarter was Soroban Capital Partners, with a stake worth $495 million.
Teck Resources Ltd announced its Q1 earnings on April 27, and reported earnings per share of $2.31, exceeding estimates by $0.06. Quarterly revenue of $3.93 billion also outperformed market estimates by $16.1 million, and showed impressive year-on-year growth of 89.76%.
2. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
Share Price (as of June 9): $61.80
The Coca-Cola Company is one of the best blue chip companies in the world, boasting worldwide sales, strong brand loyalty and pricing power for its beverages and snacks products. Priced at around $61 per share, it is also one of the most affordable stocks to buy.
The fact that The Coca-Cola Company has increased its dividend payments for the last 59 years in a row makes it even more attractive for investors to hold, and Warren Buffett’s Berkshire Hathaway owns 400 million shares of the company worth $24.79 billion, making it the firm’s largest shareholder. As of June 14, the beverage maker doles out a 2.97% yield to shareholders.
On May 9, research firm BofA added The Coca-Cola Company to the firm’s “US 1” list, which is a collection of best investment ideas picked from among its coverage of US-listed stocks with a Buy rating. On April 26, Truist analyst Bill Chappell gave The Coca-Cola Company a ‘Buy’ rating, and a revised price target of $75, up from $70. Chappell noted that the firm posted strong first quarter results with 18% organic growth, and reaffirmed its guidance for FY2022 despite increased cost pressures and headwinds from the Russia-Ukraine crisis.
For the first quarter, The Coca-Cola Company posted earnings per share of $0.64, above estimates by $0.06. Quarterly revenue of $10.5 billion outperformed analysts’ expectations by $670.8 million and increased 16.44% in contrast to the same period over last year.
Out of the 900+ elite hedge funds tracked by Insider Monkey, 64 reported ownership of stakes in The Coca-Cola Company at the end of the first quarter, with a collective price tag of $29.17 billion. This is down from 70 hedge funds a quarter earlier.
ClearBridge Investments, an asset management firm, mentioned The Coca-Cola Company in its Q4 2021 investor letter. Here’s what it said:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
1. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 99
Share Price (as of June 9): $34.51
Bank of America Corporation is the second largest banking company in the United States, and part of the Big Four banking institutions alongside Citigroup, JPMorgan Chase, and Wells Fargo. Shares of the company are priced at around $34.5, making it one of the most affordable high-quality names to buy. BAC pays a 2.67% dividend as of June 14, and has increased its payouts for 8 years in a row.
In early May, Oppenheimer analyst Chris Kotowski urged investors to take advantage of Bank of America Corporation’s (NYSE:BAC) recent share price weakness and buy the stock. He noted that banks tend to do well when interest rates rise, and that they should remain “solidly profitable with their dividends intact” in the current macro environment. The analyst gave the stock an unchanged ‘Outperform’ rating and a $50 price target, down from $52.
For the first quarter of 2022, Bank of America Corporation posted revenue of $23.23 billion, which exceeded analysts’ forecasts by $135.8 million. EPS stood at $0.80, above market forecasts by $0.06.
At the end of the first quarter, 99 out of the 912 hedge funds tracked by Insider Monkey owned positions in Bank of America Corporation, with a collective price tag of $45.43 billion. This shows an improving trend over the previous quarter where 84 hedge funds were long on the company shares. With a massive $41.6 billion position, Warren Buffett’s Berkshire Hathaway was the most prominent shareholder of Bank of America Corporation in the first quarter.
Investment firm Miller Value Partners talked about Bank of America Corporation in its Q1 2022 investor letter. Here’s what the fund said:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
You can also take a look at Top 10 Energy Dividend Stocks To Invest In and 10 Best Stock Picks and Investments Of Billionaire Chamath Palihapitiya.
