In the last 18 months, many high-quality stocks took huge hits as investors waited for the recession that hasn’t come and that, in my opinion, will not arrive any time soon. Given the huge pullbacks that these names underwent, there are plenty of affordable blue-chip stocks under $15 to buy.
The biggest reason I believe that a recession is not in the cards is the great condition of the labor market, which remains very strong according to the most recent data. And although the bears like to talk about “deteriorating consumer balance sheets” and “exploding credit card debt,” the fact is that, according to the Fed, the ratio of household debt to GDP at the end of last year was 76%, versus 78% at the end of 2018.
Importantly, I used my usual definition of “blue-chip stocks,” which is perhaps somewhat atypical for this column. Specifically, I define “blue chip” as firms that are among the leaders of their sectors and that are profitable or are poised to enter the black within the next year or two.
Macy’s (M)
Macy’s (NYSE:M) stock is priced for disaster, as its forward price-earnings ratio is a tiny 4.7, and its price-sales ratio is an infinitesimal 0.16.
And while its comparable sales did sink 7.2% last quarter, that’s far from a disaster, as it still managed to generate earnings per share, excluding certain items, of 56 cents.
The company cut its full-year sales guidance slightly and lowered its adjusted EPS guidance range to $2.70 to $3.20 from $3.67 to $4.11. However, as I mentioned earlier, its valuation is still extremely attractive. What’s more, I expect the retailer to benefit from consumers’ increased spending on goods starting later this year.
Research firm Gordon Haskett was also bullish on M stock in the wake of its Q1 results, which upgraded the shares to “buy,” citing valuation. Additionally, the firm reported that in May, Macy’s “same-store sales accelerated from April across all banners with a notable recovery in the…seasonal parts of the company’s business.”
Also noteworthy is that according to Gordon Haskett, Macy’s “less weather sensitive categories..have remained healthy since February.”
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT), which sells and services EV chargers, reported very impressive first-quarter results as its top line soared 59% versus the same period a year earlier to $130 million.
And in another very positive development, CHPT reported that it intends to cut its EBITDA loss, excluding certain items, by “approximately two-thirds by the fourth quarter of [its current fiscal year]…compared to the first quarter.” Clearly, the company is rapidly closing in on profitability.
The company reported a Q1 EBITDA loss of $48.9 million. So by the end of this year, its quarterly adjusted EBITDA loss will be down to a rather low $16 million.
Wall Street was probably disappointed by the company’s Q2 revenue guidance which came in below analysts’ average estimate. However, if the company reaches the midpoint of the guidance range, ChargePoint’s sales will have surged 41% year-over-year.
Denny’s (DENN)
Denny’s (NYSE:DENN) reported strong first-quarter results on May 2, as its U.S. same-restaurant sales jumped 8.4% versus the same period a year earlier, and its operating income climbed to $16.1 million from $13.3 in Q1 of 2022.
Denny’s reiterated its previous 2023 guidance, which calls for a U.S. same-restaurant sales increase of 3%-6% and the opening of 35-45 new restaurants. Additionally, Denny’s expects to generate EBITDA, excluding some items, of $86 million to $90 million.
The company’s strong Q1 results and upbeat guidance increase my confidence in my positive thesis on Denny’s, which I described in a previous column. Specifically, I believe that Denny’s is benefiting from the migration of many Americans from the Northeast, where diners are prevalent, to the South, where there are many fewer diners. Given Denny’s wide-ranging menu and many breakfast choices, I believe that it can serve as a “diner substitute” for these migrants.
DENN stock has a low forward price-earnings ratio of 17, making it one of the best blue-chip stocks under $15.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
