6 Undervalued Blue-Chip Stocks Worth Owning Long-Term
Blue-chip stocks are so-named because they’re a fantastic addition to any portfolio. These companies weather any market conditions: they’re stalwarts of the economy with a sterling reputation for stability. They’re easily incorporated into any investment strategy, whether you’re building a dividend portfolio or need foundational performers to supplement riskier growth stock investments.
The one downside to blue-chip stocks is that they’re rarely affordable. Most hover at or above fair market value; and in turbulent markets, they even trade at multiples thanks to their reliability. When a blue-chip stock goes on sale, it’s a prime opportunity to open a position or add to one. Such is the case in the current market.
Here’s a look at some of the undervalued blue-chip stocks in 2022 and why it makes sense to add them to your portfolio as long-term investments.
1. Bank of America Corporation (NYSE: BAC)
With a market cap of $346.55B, Bank of America (BoA) is firmly established as a mega-cap stock. The second-largest commercial bank in the United States, BoA has roughly $2.4 trillion in assets under management. The company saw $30.56B in income from $47.67B in sales in 2021.
What makes BoA enticing is that it appears undervalued by traditional fundamental metrics. The company has a P/E of 12, just below a benchmark average of 13.50 for the banking sector and well-behind the broad market average of 35. What makes this valuation even more attractive is its price/earnings to growth ratio (PEG), which sits at a very attractive 0.50. BoA is flashing a buy signal at its current price.
2. JPMorgan Chase & Company (NYSE: JPM)
The largest commercial bank in the United States, JPMorgan Chase & Company also makes our list of undervalued blue-chip stocks for many of the same reasons as Bank of America. JPMorgan Chase sits at a market cap of $412.51B, with $46.50B in income from $57.86B in sales, indicating an impressive 80.40% profit margin.
JPMorgan Chase’s valuation metrics are very similar to other banking leaders, albeit even more enticing thanks to an excellent 6.17 price-to-free cash flow ratio. With a P/E of 9.1 and PEG of .81, both well-below industry averages, it’s not often we see a monolith company like JPMorgan Chase available at its current value.
3. Pfizer Inc. (NYSE: PFE)
Pfizer has seen significant growth over the past couple of years, fueled largely by the COVID-19 pandemic. Today, the company enjoys a $303.22B market cap, fueled by $81.29B in annual sales and a healthy annual income of $22.41B.
Against fundamental valuation metrics, Pfizer offers attractive potential for long-term investors. The company has a manageable P/E of 13.8 that looks even better against a quarter-over-quarter sales increase of 106.80%. Combined with a return on equity of 30.20%, it’s clear that Pfizer has the mechanisms in-place to continue generating strong cash flows even beyond the pandemic. And, with a low 0.50 debt-to-equity ratio, the balance sheet is in great shape.
4. Novartis AG (NYSE: NVS)
Just barely in the mega-cap range with a $207.01B market cap, Novartis might be the most appealing prospect on this list. An extremely low P/E of 8, an attractive PEG of 1.52 and an extremely low debt-to-equity ratio of 0.46 all signal that investors undervalue Novartis at its current price.
The future ahead is also bright for Novartis. The company has an exceptional return on equity of 42%, signaling management’s ability to maximize investor dollars, as well as an impressive 45.40% profit margin that signals plenty of free cash flow opportunities in the future. Novartis is a long-term buy and hold.
5. Shell PLC (NYSE: SHEL)
Looking to capitalize on rising fuel prices? In a sector crowded with some of the biggest companies in the world, Shell stands out. Its $204.47B market cap may fall short of competitors like ExxonMobil. Yet, its valuation metrics make it an appealing play in the sector.
Shell has a P/E of 10, compared to current competitor averages of 12-14. It also has a very low debt-to-equity ratio of 0.52, coupled with a strong price-to-free cash flow of 10.30. With an outstanding $261.50B in sales resulting in $20.10B in profits, Shel has no trouble returning value to stakeholders. For those seeking to diversify into energy, Shell is an undervalued blue-chip opportunity.
6. Verizon Communications (NYSE: VZ)
Telecoms have seen volatility recently and even Verizon hasn’t been immune. The $221.10B company has seen several big swings in 2022, yet remains relatively undervalued among blue-chip stocks according to fundamental metrics.
The company’s P/E of 9.6 is attractive based on its $133.61B in sales and subsequent $22.07B in profits. This, coupled with its dividend of 5% shows that the company has no problem generating free cash flow—even enough to cover the higher-than-average debts associated with the telecom sector. One of the most attractive factors about Verizon is its low risk beta of 0.38. In fact, this is sure to draw conservative investors looking for long-term value plays.
BONUS: Meta Platforms (NASDAQ: FB)
It’s not often companies survive the kind of turbulence Meta Platforms faces in 2022. The company is down 36% year-to-date, with trepidations rising about its future. Yet, it’s important to look beyond the headlines at the company’s fundamentals. When we do, signs actually point to a value play.
For starters, Meta Platforms has a debt-to-equity ratio of 0, with $117.93B in sales culminating in $39.37B in profit. Its ability to sustain itself are second-to-none. It’s also a tech company with a PEG of 0.83, which is far, far below current benchmarked industry averages. While its P/E is nominal at 15.34, it’s nonetheless low for the tech sector and incredibly attractive for a company with a $552.66B market cap.
Cash in on Undervalued Blue-Chip Stocks
It’s not every day that mega-cap market stalwarts trade at levels closely relative to their intrinsic value. And it’s difficult to find truly undervalued blue-chip stocks in a bull market. However, the above stocks represent an opportunity for investors to cash in on companies primed to deliver stability, consistency and strong returns far into the future.