Blue-chip stocks offer more stability and less risk than companies in high-growth phases that are burning through cash. These types of stocks can reward long-term investors while having less volatility than most equities.
While some blue-chip stocks fall behind the stock market in the long run, other blue-chip stocks continue to outperform. Investors looking for some promising investment opportunities may want to consider these picks.
Chipotle (CMG)
Chipotle (NYSE:CMG) has established itself as a healthier fast-food restaurant among the available choices. That branding choice helped the company reverse decelerating revenue growth and deliver an exceptional fourth quarter.
During Q4 2023, the company increased revenue by 15.4% year-over-year. That’s higher than the company’s full-year revenue increase of 14.3% year-over-year. Chipotle also saw a 27.3% year-over-year increase in diluted earnings per share. Chipotle’s $282.1 million in net income was enough to secure an 11.3% net profit margin.
Chipotle also opened 121 new restaurants. It’s no surprise that 110 of those restaurants included a Chipotlane, which has been a growth driver for the company.
Chipotle has been a rewarded long-term pick for investors. The equity is up by 44% over the past year and has surged by 327% over the past five years. Shares of the fast food restaurant currently trade at a 47 forward P/E ratio.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is a staple in many funds and continues to deliver exceptional returns for long-term investors. The stock has outperformed the market over the past year and over the past five years. It’s a pivotal stock for the S&P 500 and the Nasdaq 100.
Microsoft has several growth verticals that have consistently produced revenue growth and profits. The tech giant has meaningful exposure in cloud computing, social media, advertising, artificial intelligence, gaming, and other industries.
Microsoft delivered 18% year-over-year revenue growth in Q2 FY24 with cloud revenue being a standout. That segment experienced 24% year-over-year revenue growth during the quarter.
Microsoft has been winning new customers by infusing artificial intelligence into its entire tech stack. For instance, Copilot is an AI assistant that helps businesses and individuals navigate Microsoft Office products more efficiently.
The company invested in a Super Bowl ad for Copilot which shows it is serious about its latest AI product.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) continues to grow at a fast pace. E-commerce sales showed resilience as the company reported a 14% year-over-year revenue increase in Q4 2023. Amazon Web Services also had a better quarter than the prior one and grew by 13% year-over-year.
Amazon had a record-breaking holiday season and saw elevated growth in international markets. The company’s generative AI capabilities offer an exciting growth opportunity. The company’s Bedrock makes it easier for developers to scale AI applications. This resource will increase demand for Amazon Web Services and can further fuel the stock.
Amazon has been pacing the stock market with a 70% gain over the past year. Shares are up by 115% over the past five years. North American sales are still the lion’s share of the company’s total net sales. Amazon can still generate more growth by tapping into international markets. The company has exposure to multiple verticals and seems likely to reward long-term investors.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) produces many essential home products and has a portfolio of household brands. The stock doesn’t offer tremendous upside but is still respectable. Shares are up by 14% over the past year and have gained 60% over the past five years.
While other companies can outperform PG stock, few equities can compare to the consumer goods company’s dividend payouts. Procter & Gamble has been giving out dividends for 133 consecutive years. That includes 67 consecutive years of dividend hikes. The asset has a 2.40% dividend yield.
Procter & Gamble reported mild earnings, which is to be expected from a mature blue-chip stock. Revenue increased by 3% year-over-year in Q2 FY24 while core EPS increased by 16% year-over-year. These aren’t groundbreaking gains, but they show that the company is still expanding its market share.
The company is more resilient during recessions since consumers will reduce other expenses before trimming essential products. It can be a useful equity for a conservative investor’s portfolio.
Mastercard (MA)
Mastercard (NYSE:MA) has been outperforming Visa (NYSE:V) in recent months. A meaningful rally has resulted in a 1-year gain of 25%. The stock has gained 106% over the past five years.
The credit and debit card firm reported 13% year-over-year revenue growth in the fourth quarter of 2023. Net income reached $2.8 billion, which represents an 11% year-over-year growth rate. Mastercard had higher revenue growth than Visa but lagged in net income growth. Both financial firms offer impressive growth rates.
Michael Miebach, CEO of Mastercard, cited healthy consumer spending and strong growth in cross-border volume when commenting on earnings. Mastercard closed out 2023 by repurchasing $9.0 billion worth of shares and distributing $2.2 billion in dividends.
Mastercard’s dividend yield is a low 0.60%, but historical dividend growth has been incredible. The firm started 2024 by hiking its quarterly dividend from $0.57 per share to $0.66 per share. This growth is a 15.8% year-over-year increase.
Walmart (WMT)
Walmart (NYSE:WMT) is a reliable retailer that is tapping into e-commerce and international markets for additional growth opportunities. E-commerce sales rallied by 15% year-over-year in the third quarter of 2023 while overall sales increased by 5.2% year-over-year.
Walmart’s e-commerce growth has been stronger in domestic markets while retail store revenue growth has been higher in international markets. The company’s global advertising revenue jumped by 20% year-over-year. While this is an exciting development because of higher margins and a good growth rate, advertising makes up a small percentage of Walmart’s total sales.
Walmart offers lower volatility than most of the stock market because of its 0.49 beta. The S&P 500 has a 1.00 beta. The company also offers more protection during a recession since the retailer specializes in offering affordable goods and services.
The stock can also rally when the economy is booming. Shares are up by 69% over the past five years.
IBM (IBM)
After languishing for several years and yielding a lost decade for some investors, IBM (NYSE:IBM) is righting the ship. Shares are up by 37% over the past year and offer a 3.55% dividend yield.
The firm closed out the fourth quarter of 2023 with 4% year-over-year revenue growth. The company has experienced more demand for its hybrid cloud and artificial intelligence offerings.
While other AI stocks have soared much higher than IBM, the company only trades at a 23 P/E ratio. The company’s forward P/E ratio is currently 18.50. The reinvented company’s net income increased by 14% year-over-year in the fourth quarter.
IBM anticipates achieving mid-single-digit year-over-year revenue growth in 2024. The firm also expects to generate $12 billion in free cash flow. Other tech companies will outperform this stock and it is unlikely to outperform index funds. However, investors looking for more stability during economic uncertainty may want to consider this pick.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
