Looking for undervalued blue-chip stocks to buy? This is a great time to be doing so. The stock market as a whole is enjoying a strong rally. And yet, there are still plenty of blue-chip stocks with high potential today. Investors might think that they have to give up the possibility of large capital gains to invest in safer conservative companies. But these seven best-value blue-chip stocks to buy offer upside at a good starting price. Morningstar agrees, with all seven of these picks being among their 4- or 5-star stocks today, suggesting they are on sale now.
Blue-Chip Stocks to Buy: Danaher (DHR)
One of the top blue-chip stocks to buy is Danaher (NYSE:DHR), a healthcare company focused on laboratory tools and services.
That is a recent development, however, as Danaher began as an industrial conglomerate with a wide array of products. Over the years, management has been a whirlwind of mergers and acquisitions, deftly adding and divesting operations. It’s been so successful, in fact, that a $10,000 investment in Danaher shares in June 1993 would now be worth a stunning $1.73 million. Danaher hasn’t gotten complacent with its success. In fact, the firm is rapidly reinventing itself once again. It has already divested almost all of its slower-moving businesses, and the spin-off for its water business will conclude later this year.
At that point, Danaher will be solely focused on healthcare, primarily on the tools and equipment needed for drug discovery. Analysts expect bioprocessing, in particular, to be a huge growth market over the next decade, and DHR stock will be a big beneficiary. Sales sold off as COVID-related sales have faded, however, that makes for a great entry point today.
Becton, Dickinson (BDX)
Becton, Dickinson (NYSE:BDX) is a leading medical devices company focused on surgical implements. Its core business is in making syringes, needles, infusion pumps, medication dispensers, and so on.
These basic goods may seem like commodity products, but Becton, Dickinson has a major scale advantage due to its large size and durable relationships with hospitals, insurers, and other key players. And, like Danaher, it will naturally see revenues rise as the population ages and needs more surgeries and medical procedures.
In recent years, Becton, Dickinson saw a surge in revenues related to temporary demand from COVID-19-related products. That has faded recently, and BDX stock has underperformed amid the slowdown. However, the company has reinvested profits into faster-growing device lines which should power growth in future years. Morningstar’s Alex Morozov sees shares as 16% undervalued today.
Goldman Sachs (GS)
Goldman Sachs (NYSE:GS) is not having a great year. Shares are down nearly 10% year-to-date. Some of that is due to the banking industry crisis, but people have been griping about Goldman’s performance in particular, as well.
It’s true that operations slowed, particularly due to slow capital market conditions in 2022. Revenues from IPOs and merger advising naturally fell as the bear market reduced demand for capital markets services. Goldman is now aggressively cost-cutting to deal with the slowdown in deal activity.
However, investors shouldn’t fret over this too much. For one thing, markets are already heating back up. We’ve seen high-profile IPOs such as the Cava (NYSE:CAVA) offering in recent weeks which should bring back demand for Goldman’s services.
On the consumer side, Goldman should enjoy substantial growth in the coming years. For example, Goldman is the bank partner for Apple Card’s new high-yield savings program. This should bring in a ton of new deposits for Goldman to invest profitably from Apple’s loyal user base.
With the recent pullback, GS stock is back under 10 times forward earnings and offers a 3.2% dividend yield.
General Dynamics (GD)
General Dynamics (NYSE:GD) is a leading defense contractor. It also has its Gulfstream commercial jet program.
The defense sector has seen a rise in demand recently due to the ongoing conflict in Ukraine. Rising geopolitical tensions in other parts of the world, such as in a potential dispute over Taiwan, are leading to rising spending on General Dynamics products.
On the commercial side, Gulfstream produces top-notch long-range wide-body private jets. This segment has come roaring to life over the past few years amid a global surge in spending on luxury goods. The allure of private jets also grew in response to the pandemic as wealthy folks sought to avoid crowded commercial flights.
GD stock dipped earlier this year around worries related to the debt ceiling. In theory, a budget impasse could have cut spending on the defense sector. That appears to have cleared up, however, GD stock remains cheap. Shares are down nearly 15% year-to-date, leaving them at less than 17 times forward earnings.
Roper Technologies (ROP)
Roper Technologies (NYSE:ROP) is a leading conglomerate focused on industrial software. It operates software for a vast array of industries including but hardly limited to K-12 education, power plant management, insurance, animation and graphics, and food service. Roper may not be a household name. But it has a long track record of delivering growth and income for shareholders; it is a Dividend Aristocrat which has increased its annual payout for more than 25 years in a row.
Roper shares are undervalued in general. And there is a specific catalyst on the horizon. The company just announced that it will be moving its primary listing from the New York Stock Exchange to the Nasdaq. This will be effective on July 6th. In doing so, Roper will become eligible for a number of new index funds, including ones tied to the influential Nasdaq 100 Index. This should lift ROP stock as a flood of passive money buys into Roper shares.
Wells Fargo (WFC)
Wells Fargo (NYSE:WFC) is one of the largest banks in America. With a well-diversified model, it has sizable operations in both investment and consumer banking. It’s also one of the largest mortgage originators in the country. Wells Fargo greatly underperformed its peers over the past five years. This came about in large part due to the company’s fake accounts scandals. However, it’s time to move on.
The company has an entirely new management team now, including the highly respected Charles Scharf as CEO. It has settled most of the regulatory investigations stemming from those events. And Wells Fargo is now focused on cost-cutting as it gets back to normal operations.
Wells Fargo is currently dealing with a dip in profits as its mortgage business sees less volume due to high-interest rates and it has reduced its efforts there. Even so, WFC stock is going for less than 9x forward earnings. And earnings should rise considerably once the economic cycle turns. WFC stock also offers a 3% dividend yield.
General Motors (GM)
According to Morningstar’s analysts, General Motors (NYSE:GM) is one of the single most undervalued blue-chip stocks out there today. Their analysts assign a $78/share fair value to GM stock, as compared to its recent closing price of $36. This suggests GM stock is more than 50% undervalued today.
What explains the deep undervaluation? It seems investors might be underappreciating General Motors’ advantages. The company has tremendous scale and has been quick to move into advancing fields such as electric vehicles and batteries. The firm’s financing business also gives it advantages in the marketplace.
GE stock is currently selling for 5.4x forward earnings. This low valuation is understandable as investors fret about the potential negative impacts of higher interest rates and a potential recession on the auto market. However, if the economy holds up better than expected, GM shares could have tremendous upside.
On the date of publication, Ian Bezek held a long position in DHR, BDX, GS, GD, ROP, and WFC stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
