In a very competitive global environment, big companies keep getting bigger. Top blue-chip stocks continue to leverage their scale to drive growth and deliver higher value to customers. And guess what? Investors appreciate these behemoths, as proven by the Magnificent Seven rally since the October 2022 low.
According to Statista, 50 global companies had over $20 billion in pretax income in 2023. These blue-chip stocks represent world-dominating and free cash-flow-gushing giants. Of course, Saudi Aramco, the oil-producing giant, leads this list with a stunning $247 billion pretax income in 2023.
Several of these behemoths are investable today. Their dominance in their industries is unquestioned and they will continue to thrive. What’s more, you can buy these blue-chip stocks for under 20 times forward earnings.
Under the stewardship of their experienced management, these companies are growing in dominance. Even better, their rock-solid balance sheets allow them to withstand any economic downturn.
Berkshire Hathaway (BRK-A)(BRK-B)
Warren Buffet-led Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) is one of the quintessential blue-chip stocks to buy today. With unmatched balance sheet strength and industry dominance, the stock is too profitable to ignore. As of this writing, the stock trades at 19 times 2024 earnings estimates.
This conglomerate is a behemoth like no other. Looking at its financial results, it is undoubtedly one of the most profitable businesses. In 2023, it generated $37.3 billion in operating earnings. If that’s not enough, what about the $168 billion cash hoard on its balance sheet?
Berkshire will continue to be a profit machine led by its dominant businesses. First, its insurance business, mainly in property and casualty, has been a source of profitable growth for years. In 2023, insurance underwriting earned $5.4 billion in after-tax earnings and generated investment income of $3.1 billion.
The conglomerate’s dominance doesn’t end in insurance. Its railway subsidiary, BNSF, is the largest rail operator in North America. It has 32,500 route miles of rail tracks in 28 states in the U.S. and three Canadian provinces. Although after-tax earnings declined 14% in 2023 due to lower freight volumes, it still earned $5 billion.
The third large business is the energy and utilities business, which includes electric utilities, pipelines, natural gas storage and export facilities. The company also has interests in various subsidiaries involved in manufacturing, service and retailing. To top it off, Berkshire has an investment portfolio worth $370 billion.
Collectively, these businesses will continue to drive operating earnings. Buffet believes the company has a “Niagara of diverse earnings” and is built to last.
JPMorgan Chase (JPM)
As the regional bank woes after Silicon Valley Bank collapsed have shown, big money center banks are winning. Indeed, this narrative has only strengthened after the recent troubles at New York Community Bancorp (NYSE:NYCB). That’s why the “too big to fail” banks like JPMorgan Chase (NYSE:JPM) will continue growing at the expense of smaller peers.
Wells Fargo analyst Mike Mayo highlighted the disparity between large and regional banks. He thinks that Goliath will continue to win. Large money centers like JP Morgan are experiencing deposit inflows as regionals struggle. Furthermore, the increased regulatory and capital requirements mean smaller banks will struggle as well.
This dynamic means JP Morgan Chase will outperform. The bank is coming out of 2023 in excellent shape. Of note, the behemoth benefited from the banking crisis, scooping up First Republic for a song. What’s more, it experienced deposit inflows around the Silicon Valley crisis as customers fled regional banks.
Exiting 2023, JP Morgan Chase had a rock of Gibraltar-like balance sheet. It had $1.4 trillion in cash and marketable securities and $514 billion of total loss-absorbing capacity. Moreover, it had an exceptionally strong CET1 ratio of 15.0%. With this strength, the bank can survive any economic disaster.
In terms of profits, the bank earned net income of $49.5 billion or $16.25 per share in 2023. It continued to grow, with the consumer and community banking segment adding more than 2 million net new checking accounts in 2023. At 12 times trailing earnings, this is one of the blue-chip stocks to buy.
Exxon Mobil (XOM)
Despite the constant drumbeat by climate activists, Exxon Mobil (NYSE:XOM) is still one of the top blue-chip stocks to buy. Fossil fuels will be a significant part of the world energy equation for decades to come, not to mention their numerous uses in chemicals and industrial applications such as plastic.
The investment case in Exxon Mobil is as straightforward as it gets. First, global demand for fossil fuels is growing, fueled by the rise of emerging economies such as India. According to Statista’s forecast, worldwide demand for oil products will continue to grow through 2040.
Second, the company will benefit as the world shifts to cleaner energy. To be specific, many countries are gradually replacing coal energy generation with natural gas. Exxon is one of the largest natural gas producers, so it will profit. Besides, with the recent acquisition of Pioneer Natural Resources (NYSE:PXD), the company is well positioned in this area.
Third, XOM stock is a bargain, hence, it’s one of the top blue-chip stocks to buy today. After earning a $36 billion profit in 2023, XOM stock trades at only 12 times forward earnings.
What’s more, the company has a robust shareholder return program in place. As of this writing, it pays a 3.4% dividend. Additionally, its recent corporate update outlined an increase in the pace of repurchases to $20 billion per year. Considering the demand tailwinds and record profits, this behemoth should be on your radar if not in your portfolio.
On the date of publication, Charles Munyi did not hold (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.
