10 Undervalued Blue Chip Stocks to Buy Now

Published June 7, 2022 at 8:51 am EDT Updated August 19, 2026 at 7:59 am EDT

In this article, we discuss the 10 undervalued blue-chip stocks to buy now.

Blue-chip companies are considered to be established and large-scale organizations with a rich history of long-term stable financial performance. These stocks have the power to hold their value during economic uncertainty and give strong returns during a healthy economic period.

The uncertainty this year has investors on the lookout for blue-chip stocks due to the turbulent economic environment. The Russia-Ukraine conflict resulted in energy and commodity prices rocketing. This triggered inflation, which is causing the US Federal Reserve to tighten its monetary policy by raising interest rates. The increase in interest rates does not work well for high-growth stocks as they use leverage to boost their growth and the cost of growth becomes expensive. As a result, the valuation of growth stocks comes under pressure and starts experiencing contraction. This was evident during the recent sell-off in the tech sector.

Companies with a strong history of increasing earnings and dividends and the ability to weather the downturn tend to deliver the most consistent long-term returns. The rationale for purchasing blue-chip companies is stronger than ever, with interest rates surging and global tensions at all-time highs. As the business operations of most blue-chip stocks are stable, they give back to shareholders through dividends and share repurchase programs. Placing funds in blue-chip stocks gives you a margin of safety during recessionary periods.

Many hedge funds are heavily invested in popular blue-chip stocks like Meta Platforms, Inc. (NASDAQ:FB), Philip Morris International Inc. (NYSE:PM), and Pfizer Inc. (NYSE:PFE). Thirteen of the Dow’s 30 equities are among the most popular hedge fund stock picks. This is due in part to the Dow stocks’ high market capitalizations and associated liquidity, which allows institutional investors to acquire or sell big holdings with ease. For experienced money managers, renowned blue-chip stocks also carry a reduced level of reputational risk.

Our Methodology

In this article, we take a look at 10 undervalued blue-chip stocks to buy now. We have analyzed the forward P/E ratio to assess the valuation of stocks and see if companies are currently trading at a discount. Furthermore, the business fundamentals and growth prospects have been observed to consider the future performance of these stocks. Hedge fund sentiment, based on the 912 funds in Insider Monkey’s database as of Q1 2022, has also been included to provide readers with a better context for investment decisions.

10 Undervalued Blue Chip Stocks to Buy Now

10. Alcoa Corporation (NYSE:AA)

Share Price as of June 6: $63.01

Number of Hedge Fund Holders: 50

Alcoa Corporation (NYSE:AA) is a Pittsburgh, Pennsylvania-based bauxite, alumina, and aluminum producer with operations spread across 10 countries around the world.

The average price of aluminum has doubled from $1,915 per metric ton in 2020 to $3,861 as of Q1 2022. The demand for aluminum looks strong as electric vehicles use them to reduce their weight and thus increase their range. During Q1 2022, Alcoa Corporation reported quarterly EPS of $2.49, which translates into an annualized EPS of $10. This reflects that the stock is trading at a forward adjusted P/E multiple of 6.1x. As per the calculations of Simply Wall St, Alcoa Corporation is trading at a discount of around 44%, making the company quite undervalued.

In the last 6 months, Alcoa Corporation’s stock price has risen over 30%. The number of hedge funds invested in Alcoa Corporation increased by nine on a sequential basis. Soroban Capital Partners was the leading hedge fund investor in the company during Q1 2022.

9. Micron Technology, Inc. (NASDAQ:MU)

Share Price as of June 6: $69.94

Number of Hedge Fund Holders: 78

Micron Technology, Inc. (NASDAQ:MU) is a Boise, Idaho-based memory and storage products company. The company produces products like dynamic random-access memory (DRAM), flash memory, and USB flash devices.

In a report filed on May 14, Eric J. Savitz at Barron’s termed Micron Technology, Inc. as the most undervalued stock in the equity market with a one-year forward adjusted P/E multiple of five times. Analysts are thinking along similar lines as C.J Muse at Evercore ISI termed Micron Technology, Inc. stock a steal in the high 60s for investors that are looking for a long-term investment opportunity.

In a note issued to investors on May 13 following the analyst day meeting, Muse maintained an Outperform rating on Micron Technology, Inc. stock with a price target of $90. According to him, the biggest takeaway was that the memory market is outperforming the semiconductor marketing in terms of growth and the companies in the industry are acting in a disciplined manner.

Here’s what Hazelton Capital Partners said about Micron Technology, Inc. in its Q3 2021 investor letter:

“It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.

Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”

As of Q1 2022, Micron Technology, Inc. was held by 78 hedge funds.

8. American International Group, Inc. (NYSE:AIG)

Share Price as of June 6: $58.04

Number of Hedge Fund Holders: 34

American International Group, Inc. (NYSE:AIG) is a leading diversified insurance company with operations spread across 80 countries and a headcount of 49,600 employees. The stock is trading at a forward adjusted P/E multiple of 11.02x, which represents a discount of 7.4% when compared against the average five-year forward adjusted P/E multiple of 11.90x.

American International Group, Inc. is working on spinning off its Life and Retirement business into a new entity called Corebridge. This will allow the company to focus on its casualty and property business. Furthermore, American International Group, Inc. has reached an agreement with BlackRock to manage up to $150 billion worth of its assets. AIG is one of the few companies that are benefitted from an interest rate hike as this increases the discount rate applied to future liabilities. Furthermore, rising interest rates also make annuities more attractive to potential customers. Although American International Group, Inc. has not increased its dividend for the past five years, it is still offering a forward dividend yield of 2.20% as of June 6.

American International Group, Inc. was held by 34 hedge funds as of Q1 2022.

7. Nutrien Ltd. (NYSE:NTR)

Share Price as of June 6: $93.34

Number of Hedge Fund Holders: 60

Nutrien Ltd. (NYSE:NTR) is a Saskatoon, Saskatchewan-based fertilizer company that has gained more prominence following the start of the conflict between Russia and Ukraine in late February 2022. Nutrien Ltd. is the biggest manufacturer of potash and the third biggest manufacturer of nitrogen fertilizer globally.

Russia is the world’s leading exporter of fertilizers. The conflict has caused Russia to ban exports of fertilizer to fulfill the demand for local agriculture production. Fertilizers’ price has more than doubled since September 2020. Furthermore, natural gas prices are continuing to rise, which is a key raw material in the manufacturing of fertilizers. Nutrien Ltd. anticipates FY22 EPS to be in the range of $16.20 to $18.70. At a midpoint of $17.45, Nutrien Ltd. stock is trading at an FY22 adjusted P/E ratio of 5.35x only.

In its Q1 2021 investor letter, Miller/Howard Investments discussed its stance on Nutrien Ltd.. Here’s what the investment management firm said:

“For the most part, performance of the stocks within the Income-Equity Strategies was skewed towards the high-performing market sectors with two exceptions – our consumer discretionary and technology stocks both did better than their broad market peers… We bought Nutrien (NTR), a producer of fertilizer, which we believe should benefit from increasing crop prices.”

At the end of Q1 2022, Nutrien Ltd. was held by 60 hedge funds.

6. Microsoft Corporation (NASDAQ:MSFT)

Share Price as of June 6: $273.02

Number of Hedge Fund Holders: 259

Microsoft Corporation (NASDAQ:MSFT) is a Redmond, Washington-based tech giant that manufactures and sells consumer goods, personal computers, and software. Although Microsoft Corporation’s stock is trading at a forward adjusted P/E multiple of 28.7x, which seems to be high as compared to other members on this list, the stock can still be considered undervalued given the business fundamentals.

The revenue of Microsoft Corporation’s cloud business grew by 29% YoY to $19.1 billion during Q3 FY2022. The cloud segment contributed 39% to the total revenue and had a gross profit margin of around 70%. Azure is the cloud computing platform of Microsoft Corporation that allows users to construct, operate and manage various applications across different clouds. Just a month before the completion of the fourth quarter of FY2022, Microsoft Corporation revised its revenue and EPS estimates due to an unfavorable exchange rate impact. The EPS guidance was revised to $2.24 to $2.35 as opposed to the prior guidance of $2.28 to $2.35.

Microsoft Corporation was discussed in the Q4 2021 investor letter of Motiwala Capital. Here’s what the firm said:

“Microsoft (NASDAQ:MSFT) re-enters our portfolio after a long gap. MSFT sells enterprise and consumer software products as well as hardware products such as the Xbox video game console and Surface laptops. All business segments experienced double-digit revenue growth and earnings per share have compounded in the mid-double digits over the last 5 years. We believe MSFT continues this momentum in the years ahead.”

As of Q1 2022, 259 funds held a stake in Microsoft Corporation.

Besides Microsoft Corporation, stocks such as Meta Platforms, Inc., Philip Morris International Inc., and Pfizer Inc. are also among the 10 undervalued blue-chip stocks to buy now.

5. Pfizer Inc. (NYSE:PFE)

Share Price as of June 6: $53.31

Number of Hedge Fund Holders: 79

Pfizer Inc. is a New York-based pharmaceutical and biotech giant that has spearheaded the fight against COVID-19 through the Pfizer-BioNTech vaccine. The stock is trading at a forward adjusted P/E multiple of 7.83x. This reflects a discount of over 37% from the five-year average forward adjusted P/E multiple of 12.54x.

Pfizer Inc.’s management is working on increasing innovation as it is moving past the peak in terms of healthy cash flow and bottom line generated by the COVID-19 vaccine and faces the possibility of the patent cliff by mid-decade. One such action taken by the management is the recent acquisition of Biohaven Pharmaceuticals Holding Company Ltd. (NYSE:BHVN) for $11.6 billion in cash on May 10. The New Haven, Connecticut-based company is the maker of NURTEC ODT, which is an approved therapy for the treatment of the episodic and acute treatment of migraine in adults.

ClearBridge Investments shared its insights on Pfizer Inc. in its Q3 2021 investor letter. Here’s what the firm said:

“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.

What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.”

Of the 912 hedge funds in Insider Monkey’s database, 79 funds held a stake in Pfizer Inc. as of Q1 2022.

4. 3M Company (NYSE:MMM)

Share Price as of June 6: $146.35

Number of Hedge Fund Holders: 51

3M Company (NYSE:MMM) is a Saint Paul, Minnesota-based diversified industrial conglomerate involved in worker safety, healthcare, and consumer goods. The company is a member of the esteemed Dividend King List, which comprises only 39 companies that have increased their annual dividends for the past 50 consecutive years or more. 3M Company has a dividend yield of 4.09% as of June 6.

3M Company is facing near-term headwinds as it anticipates a $300 million decline in revenue and 30 cents fall in EPS during the current quarter due to the supply chain challenges caused by the lockdown in China. Furthermore, the company is facing an overhang due to the settlement of the PFAS cases. However, 3M Company is expected to move beyond these short-term challenges and offer a significant upside potential to investors. These developments have caused 3M Company stock to trade at a forward adjusted P/E multiple of 13.65x. This reflects a 17.3% discount against the sector and a near 30% discount against the average five-year forward P/E multiple.

3M Company was held by 51 hedge funds as of Q1 2022.

3. American Express Company (NYSE:AXP)

Share Price as of June 6: $166.83

Number of Hedge Fund Holders: 69

American Express Company (NYSE:AXP) is a New York-based company that provides payment card services globally. The company is the third biggest holding in Warren Buffett’s Berkshire Hathaway Inc’s (NYSE:BRK-B) portfolio as of March 31,

At a forward adjusted P/E multiple of 17x, American Express Company stock is trading at a discount of 7.4% when compared against the five-year average forward adjusted P/E multiple of 18.36x. The company generates revenue from two sources: cardholders and merchant transactions. The revenue from merchant transactions reflects less volatility as it is dependent on the number of merchants using the service of American Express Company. However, the cardholders would be impacted by the hike in interest rate as they are charged a variable APR on their balances.

In its Q2 2021 investor letter, ClearBridge Investments mentioned American Express Company. Here’s what the firm said:

“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”

American Express Company was held by 69 hedge funds as of Q1 2022.

2. Philip Morris International Inc. (NYSE:PM)

Share Price as of June 6: $106.99

Number of Hedge Fund Holders: 55

Philip Morris International Inc. is a tobacco company with a presence in over 180 countries. The most notable product in the corporation’s portfolio is Marlboro. The stock offers low volatility and is resistant to recessions. Philip Morris International Inc. has a dividend yield of over 6% as of June 6.

As the number of smokers is on a declining trend across the globe, the New York-based company is making a strategic shift and preparing itself to move away from selling cigarettes in the majority of markets in the next 15 years. Philip Morris International Inc. has invested $9.2 billion in IQOS heat sticks since 2014 to shift towards a smoke-free future. The investment in IQOS is paying off as it has become the second most popular nicotine brand around the world. Philip Morris International Inc. has a forward P/E ratio of 17.54x as of June 6.

Here’s what Broyhill Asset Management said about Philip Morris International Inc. in its Q2 2021 investor letter:

“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.

‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”

1. Meta Platforms, Inc. (NASDAQ:FB)

Share Price as of June 6: $193.39

Number of Hedge Fund Holders: 200

Meta Platforms, Inc. is a Menlo Park, California-based diversified technology conglomerate and the parent organization of notable social media and instant messaging platforms like Facebook, Instagram, and WhatsApp. Meta Platforms, Inc. is now making a strategic shift towards augmented reality through Metaverse and Oculus VR headsets.

Meta Platforms, Inc. is undergoing a shakeup in the higher echelon of the organization. Within the previous week, the company announced the departure of COO Sheryl Sandberg and VP of AI Jerome Pesenti. The stock is currently trading at a multi-year low and has lost nearly 50% of its value since its peak in August 2021. The major reason for the decline in stock price is growth-related concerns and negative news flow. Meta Platforms, Inc. is trading at a forward adjusted P/E multiple of 16.28x, reflecting a discount of 35.3% from its five-year average adjusted P/E multiple of 25.18x. For a dominant market leader, this is a cheap multiple.

Giverny Capital shared its insights on Meta Platforms, Inc. in its Q1 2022 investor letter. Here’s what it said:

“If there is any good news, I don’t believe this group suffered material impairments to their long-term earnings trajectory. Rather, relatively small earnings misses or reductions to short-term guidance led to large stock declines. I added to several of these positions during the quarter.

However, our holding Meta Platforms, the detested social media business formerly known as Facebook, deserves some attention. It suffered an earnings miss in the fourth quarter of 2021 and provided sobering future guidance. While this qualifies as disappointing news, I think the market reaction was more of a primal scream than a considered response.

As a person who manages other people’s money for a living, I can tell you with confidence that clients don’t like Meta. A few of you won’t own it, restricting me from buying it for you. Others defer to me,
grudgingly. There is no other security in our portfolio like this. When a company is so widely disliked, the main reason to hold it is because it is “working,” to use the horrible Wall Street parlance. In other words, your manager owns it because it keeps going up. Once it stops going up, professional money managers happily accept the chance to sell it. No more cranky calls from clients questioning their ethical compass.

The rub, however, is that despite the bad earnings news the economics of Meta’s social media businesses remain exceptionally good. In 2021, for every dollar of revenue generated Meta spent 63 cents on expenses and reported 37 cents of pretax profit. That was considered disappointing, even though very few businesses generate 37% profit margins. On top of that, fully one-third of expenses, or 21 cents on the dollar of revenue, is spent on research & development, which is investment in future growth. In Meta’s case, this amounts to about $25 billion a year invested in various new projects, the most important of which is the metaverse. R&D is not completely discretionary as companies have to invest in innovation or stagnate. But management certainly has flexibility as to the pace of spending…” (Click here to see the full text)

Meta Platforms, Inc. was held by 200 hedge funds as of Q1 2022.

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