In this piece, we will take a look at the 12 most undervalued blue-chip stocks to buy according to hedge funds. If you want to skip our introduction to blue chip investing, then jump ahead to 5 Most Undervalued Blue Chip Stocks To Buy According To Hedge Funds.
Blue chip stocks are some of the safest investments that anyone can make. These firms rank among the largest in the world, have stable operations, well developed markets, sizeable revenues, and often pay dividends. This lends their share prices stability, and more importantly particularly when we take a look at the currently uncertain economic environment, limits the downside to the shares that can plague other market segments such as small cap stocks.
The term blue chip itself was coined in the 1920s and has stood the test of time. The list of stocks that are typically classified as blue-chip stocks are part of the Dow 30 index, and they include some of the largest companies in the world. When it comes to market capitalization, the largest blue-chip company is Apple Inc. (NASDAQ:AAPL) whose latest market value sits at $2.76 trillion. At the same time, a high share price or recent share price performance is not a criterion for being included in the list. The best example of this phenomenon comes through the inclusion of the semiconductor giant Intel Corporation (NASDAQ:INTC).
Widely known for having popularized the microprocessor and having kicked off the personal computing race, Intel’s shares have not done well recently as the semiconductor industry undergoes a cyclical downturn and the firm struggles to keep its chipmaking lead amidst tough competition from the Taiwan Semiconductor Manufacturing Company (NYSE:TSM). Intel’s shares are relatively flat over the past 12 months and are down by a painful 29% over the past five years as the firm is desperately revamping its technology roadmap and building new facilities to regain investor confidence.
At the same time, recent stock price outperformance is not a criterion for inclusion on the list either. If this were the case, then NVIDIA Corporation (NASDAQ:NVDA) would have been a sure shot inclusion in the list. NVIDIA’s stock is up by a stunning 224% year to date, as the firm is widely believed to profit from the surge in demand for artificial intelligence products. In fact, optimism about the demand for data center products in particular led NVIDIA to guide $11 billion in revenue for its second quarter of the fiscal year 2024, which was significantly higher than the $7.2 billion penned in by analysts. The stock price reflects this optimism, and the share price appreciation appears to have no end in sight. Yet, despite all this optimism, NVIDIA is not part of the Dow 30 index even as analysts believe that it is the market leader by a wide margin when it comes to meeting AI demand. Looking at the year to date gains of the Dow 30, also known as the Dow Jones Industrial Average (DJIA) shows that the index has gained 3.72% year to date, indicating that the astute investor would have been far, far better off by having a bet on NVIDIA than the collection of elite stocks which the index represents.
The index itself is managed by S&P Global Inc. (NYSE:SPGI), and there are no specific quantitative criteria for inclusion. As the firm describes in its methodology:
While stock selection is not governed by quantitative rules, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. Since the indexes are price weighted, the Index Committee evaluates stock price when considering a company for inclusion. The Index Committee monitors whether the highest-priced stock in the index has a price more than 10 times that of the lowest. Maintaining adequate sector representation within the index is also a consideration in the selection process for the Dow Jones Industrial Average. Companies should be incorporated and headquartered in the U.S., and a plurality of revenues should be derived from the U.S.
So, for our list today, we decided to take a look at which blue chip stocks are favored by both hedge funds and Wall Street analysts. If you want to see which blue chip stocks haven’t done well this year, then you can check out 15 Worst Performing Blue Chip Stocks in 2023. Some top stock picks in the list of undervalued blue chip stocks favored by hedge funds are Visa Inc. (NYSE:V), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL).
Our Methodology
To compile our list of the most undervalued blue chip stocks to buy according to hedge funds, we ranked blue chip stocks by their share price upside in percentage based on analyst average share price targets. Then, the number of hedge fund investors in the top 20 companies was determined for the funds’ second quarter of 2023 investment portfolio, and the top 12 stocks are listed below.
12 Most Undervalued Blue-Chip Stocks to Buy According to Hedge Funds
12. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Investors In Q2 2023: 70
Share Price Upside: 20%
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the largest investment banks in the world. It is currently restructuring its business operations by considering a divestment of its investment advisory service business and limiting its services to high net worth and wealthy individuals.
By the end of this year’s second quarter, 70 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in The Goldman Sachs Group, Inc. (NYSE:GS). Out of these, the firm’s largest shareholder is Ken Fisher’s Fisher Asset Management since it owns 5.1 million shares that are worth $1.6 billion.
Along with Microsoft Corporation (NASDAQ:MSFT), Visa Inc. (NYSE:V), and Apple Inc. (NASDAQ:AAPL), The Goldman Sachs Group, Inc. (NYSE:GS) is an undervalued blue-chip stocks that hedge funds are buying.
11. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Investors In Q2 2023: 70
Share Price Upside: 24%
NIKE, Inc. (NYSE:NKE) is a consumer and professional athletic apparel provider. A discretionary stock, its fate is tied to higher spending power and the general state of the economy. Naturally, a weakening economic environment led the firm to miss its second quarter analyst EPS estimates and the shares are rated Buy on average.
After digging through 910 hedge funds for their June quarter of 2023 investments, Insider Monkey discovered that 70 had bought the firm’s shares. NIKE, Inc. (NYSE:NKE)’s biggest hedge fund investor in our database is Ken Fisher’s Fisher Asset Management courtesy of a $1 billion investment.
10. American Express Company (NYSE:AXP)
Number of Hedge Fund Investors In Q2 2023: 72
Share Price Upside: 13%
American Express Company (NYSE:AXP) is a financial and travel services provider. The firm is currently facing the heat for increasing the fee and usage requirements for its Platinum card, and some believe the increase might be to simply reduce airport lounge usage.
Insider Monkey’s Q2 2023 survey covering 910 hedge funds revealed that 72 had invested in American Express Company (NYSE:AXP). Warren Buffett’s Berkshire Hathaway is its largest stakeholder, since it owns $26 billion worth of shares.
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Investors In Q2 2023: 73
Share Price Upside: 15%
Chevron Corporation (NYSE:CVX) is a diversified oil company that operates in all segments of the supply chain. The firm is busy expanding its global energy production portfolio as it will start drilling for gas in the Asian country of Bangladesh soon.
73 out of the 910 hedge funds part of Insider Monkey’s database had bought and invested in the company’s stock during 2023’s second quarter. Out of these, Chevron Corporation (NYSE:CVX)’s biggest shareholder is Warren Buffett’s Berkshire Hathaway since it owns 123 million shares that are worth $19.3 billion.
8. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Investors In Q2 2023: 78
Share Price Upside: 14%
Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical giant. It scored a win in August when its drug for kidney cancer drug met the objectives of inhibiting the disease’s progression. Merck & Co., Inc. (NYSE:MRK) beat analyst EPS estimates for its second quarter and the stock is rated Buy on average.
Insider Monkey scoured through 910 hedge funds for their June quarter of 2023 shareholdings and discovered that 78 had held a stake in Merck & Co., Inc. (NYSE:MRK). Ken Fisher’s Fisher Asset Management is the firm’s largest investor courtesy of a $1.4 billion investment.
7. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Investors In Q2 2023: 92
Share Price Upside: 29%
The Walt Disney Company (NYSE:DIS) is an entertainment and hospitality firm. It is one of the most distressed entertainment companies these days, as a push into streaming due to the decline in cable television is proving to be difficult for the cash strapped firm with high debt levels.
By the end of this year’s second quarter, 92 out of the 910 hedge funds surveyed by Insider Monkey had invested in the company. The Walt Disney Company (NYSE:DIS)’s largest hedge fund shareholder is Ken Fisher’s Fisher Asset Management courtesy of a $580 million investment.
6. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Investors In Q2 2023: 106
Share Price Upside: 14%
JPMorgan Chase & Co. (NYSE:JPM) is the biggest private bank in the world in terms of assets. Its chief global strategist shared some insight into the Federal Reserve’s interest rate decision cycle in August, explaining that the first rate cuts should start in 2024.
106 out of the 910 hedge funds part of Insider Monkey’s research had held a stake in JPMorgan Chase & Co. (NYSE:JPM) as of Q2 2023. Out of these, the firm’s biggest investor is Ken Fisher’s Fisher Asset Management through a stake worth $1.3 billion.
Visa Inc. (NYSE:V), JPMorgan Chase & Co. (NYSE:JPM), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL) are some undervalued blue chip stocks to buy according to hedge funds.
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Disclosure: None. 12 Most Undervalued Blue Chip Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
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