In this article, we will be taking a look at 12 cheap blue chip stocks to buy. To skip our detailed analysis of the stock market, you can go directly to see the 5 Cheap Blue Chip Stocks To Buy.
The US stock market has been bearish throughout 2022, with most stocks taking a beating and share prices going on the decline. As a result, many stocks today are trading at attractive valuations, making now the time to buy into major companies while they are trading at a significant discount.
Major stocks like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) have seen significant price declines over 2022 and into 2023, making these companies seem more attractive for investors looking for bargain stocks. The market’s position too is not expected to improve too fast. According to a Barron’s article published this January, Jeremy Grantham, an investor and the co-founder of the investment firm GMO, has recently commented that the stock market is still expected to undergo severe trials. Grantham estimates that the trend line value of the S&P 500 will be around 3,200 by the end of 2023. A drop to 3,200 would represent a 17% fall for the year, and a 20% decline from the S&P 500’s finish on January 24, which stood at 4,019.81.
However, the market situation is not entirely bleak. The Dow Jones Industrial Average’s performance so far in 2023 has been optimistic. According to a CNBC article published this January, the Dow gained about 104.40 points, or 0.31%, on January 24. This marked the index’s third consecutive day of gains. This performance, despite the slowing US economy, is raising hopes in investor circles that the market can expect to see an improved overall performance in 2023.
Photo by Austin Distel on Unsplash
Our Methodology
We scanned Insider Monkey’s database of stock holdings of 920 elite hedge funds and picked the top blue chip stocks with PE ratios less than 20 as of January 25. The list is ranked in descending order of the PE ratio metric.
Cheap Blue Chip Stocks To Buy
12. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 80
P/E ratio as of January 25: 19.72
AbbVie Inc. (NYSE:ABBV) is a biotech company based in North Chicago, Illinois. The company discovers, develops, manufactures, and sells pharmaceuticals across the globe.
Robyn Karnauskas at Truist holds a Buy rating on AbbVie Inc. (NYSE:ABBV) shares as of January 10.
According to financial journalist Edmund Ingham, AbbVie Inc. (NYSE:ABBV) is currently undervalued by 15%-20%. The company’s P/E ratio falls below 20, signaling that the stock is currently trading at a discount. Truist Analysts have raised their price target on AbbVie Inc. (NYSE:ABBV) shares this January to $180. Compared to the stock’s current price as of January 25, which is $147.69, this represents significant upside potential as well.
There were 80 hedge funds long AbbVie Inc. (NYSE:ABBV) in the third quarter. Their total stake value was $1.9 billion.
AbbVie Inc. (NYSE:ABBV), like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), is a blue-chip stock with a huge hedge fund following, according to our hedge fund data.
11. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 89
P/E ratio as of January 25: 19.13
The Home Depot, Inc. (NYSE:HD) is a home improvement retail company based in Atlanta, Georgia. The company operates renowned Home Depot stores selling building materials, home improvement products, lawn and garden products, and more.
On January 13, Cowen analyst Max Rakhlenko reiterated an Outperform rating on The Home Depot, Inc. (NYSE:HD) shares.
The Home Depot, Inc. (NYSE:HD) is currently trading at $317.26 as of January 25. Compared to the Cowen analysts’ price target on the stock of $379, this share price is significantly lower. This represents upside potential harbored in the stock. As of this December, The Home Depot, Inc. (NYSE:HD) was trading at a P/E ratio of 18.87, below its five-year average, which was 21.23. Even the company’s current P/E ratio of 19.13 is below the five-year average.
In total, 89 hedge funds were long The Home Depot, Inc. (NYSE:HD) in the third quarter. Their total stake value was 5.6 billion.
10. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
P/E ratio as of January 25: 17.46
Altria Group, Inc. (NYSE:MO) is a tobacco company manufacturing and selling smokable and oral tobacco products in the US. The company is based in Richmond, Virginia.
Compared to its peers, Altria Group, Inc. (NYSE:MO) is competitive in the areas of gross profit margins and dividend yield. As of this January, the company’s gross profit margin is 67.7%, higher than competitor Philip Morris’ margin of 65.9%. It also boasts a much higher dividend yield compared to Philip Morris and British American Tobacco. The three companies’ yields stand at 8.3%, 4.9% and 7.1%, respectively. On valuation, Altria Group, Inc. (NYSE:MO) is expected to reach a share price of $55.76 under the current market environment, compared to its current share price of $44.93.
Bourgeon Capita was the largest stakeholder in Altria Group, Inc. (NYSE:MO) in the third quarter, holding 542 shares worth about $24.8 million. There were 47 hedge funds long the stock in total, with a total stake value of $1.5 billion.
9. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
P/E ratio as of January 25: 13.32
Meta Platforms, Inc. (NASDAQ:META) is a communications services company developing products that enable people to connect with friends and family through mobile devices and computers, among more. It is based in Menlo Park, California.
Credit Suisse analyst Stephen Ju holds an Outperform rating on Meta Platforms, Inc. (NASDAQ:META) shares as of January 25.
By the end of 2022, Meta Platforms, Inc. (NASDAQ:META) has seen a 75% fall in its share price. This has resulted in forecast estimates for the company’s 2023 P/E standing at 17, significantly lower than the long-run averages. Nivesha Investors considers the company to be undervalued by about 18% in the fiscal year of 2023.
Meta Platforms, Inc. (NASDAQ:META) had 177 hedge funds long its stock in the third quarter. Their total stake value was $14.2 billion.
Wedgewood Partners, an investment management firm, mentioned Meta Platforms, Inc. (NASDAQ:META) in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Meta Platforms detracted from performance during the quarter and for most of the year. Meta’s advertising revenue grew slightly (currency-adjusted) over 2021 but was up over +60% compared to 2019 (pre-Pandemic). The Company reported 2.9 billion “daily active users (DAUs)” of its Family of Apps (as of September 2022), up nearly +30% from December 2019. Despite these impressive gains, the stock now trades at absolute levels well below where it traded before the Pandemic. Much of the market’s concern revolves around slowing revenue growth and aggressive reinvestment. It is now quite evident that there was a tremendous pull-forward of demand for many businesses and services over the past couple of years. The normalization of revenue growth from that pull-forward is hardly an existential crisis. Further, while Meta’s profit margins have fallen below pre-Pandemic levels, the business likely hired well in excess of what it needed because it assumed the Pandemic induced growth would continue. Meta has plenty of room to moderate its expense base and drive significant value by repurchasing shares at today’s historically depressed multiples.”
8. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
P/E ratio as of January 25: 11.45
JPMorgan Chase & Co. (NYSE:JPM) is a diversified banking company, It is based in New York.
Keith Horowitz, an analyst at Citigroup, holds a Buy rating on JPMorgan Chase & Co. (NYSE:JPM) shares as of January 17.
Compared to peers such as Morgan Stanley with a P/E ratio of about 15.55 as of this January, JPMorgan Chase & Co. (NYSE:JPM) has a P/E ratio of 11.45. This signifies that the company is operating at a discount relative to its peers. There is also upside potential in the company at present with its current share price of $139.12 compared to Citigroup analysts’ price target on JPMorgan Chase & Co. (NYSE:JPM) being $165 as of January 17.
Out of 110 hedge funds long JPMorgan Chase & Co. (NYSE:JPM) in the third quarter, Greenhaven Associates was the largest stakeholder in the company. It held 4.8 million shares. The total stake value in the company was $6.4 billion.
7. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 74
P/E ratio as of January 25: 11.09
Micron Technology, Inc. (NASDAQ:MU) is an information technology stock based in Boise, Idaho. The company manufactures and sells memory and storage products worldwide.
As of December 22, BMO Capital’s Ambrish Srivastava holds an Outperform rating on Micron Technology, Inc. (NASDAQ:MU) shares.
According to analysts at Deep Tech Insights, Micron Technology, Inc. (NASDAQ:MU) is currently over 46% undervalued. The company also has a P/E ratio of 11.09. This is significantly lower than its peers like Advanced Micro Devices and NVIDIA Corporation, with P/E ratios of 47.11 and 51.82, respectively.
Micron Technology, Inc. (NASDAQ:MU) was found among the 13F holdings of 74 hedge funds in the third quarter. Their total stake value was $2.5 billion.
6. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 97
P/E ratio as of January 25: 10.84
Bank of America Corporation (NYSE:BAC) is another diversified banking company on our list. It is based in Charlotte, North Carolina.
Dick Bove at Odeon Capital upgraded shares of Bank of America Corporation (NYSE:BAC) from Hold to Buy on January 10.
Bank of America Corporation (NYSE:BAC) is currently trading at a P/E of 10.84x, well below the company’s 10-year average of 12x. Between January 2022 and January 2023, the company’s share price has dropped by 24%. The company is also cheaper than its competitor, JPMorgan, since Bank of America Corporation (NYSE:BAC) has a P/E of 10.84 compared to the latter’s P/E of 11.45.
Greenhaven Associates was also the largest stakeholder in Bank of America Corporation (NYSE:BAC) in the third quarter, holding 1.3 million shares. A total of 97 hedge funds were long the stock. The total stake value in the company was $35.6 billion.
Bank of America Corporation (NYSE:BAC), like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), is a highly popular blue-chip stock with many hedge funds piling into it today.
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Disclosure: None. 12 Cheap Blue Chip Stocks To Buy is originally published on Insider Monkey.
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