The U.S. Federal Reserve continued its rate-hiking campaign with Wednesday’s hike pushing rates to 22-year highs. So far, the economy has held up. But, with interest rates soaring, it seems quite possible that the housing market and broader economy will slip sooner or later. That makes it a good time to load up on resilient blue-chip stocks that can hold up even during a downturn.
Tech and growth stocks may offer the highest near-term potential. But for investors looking for more conservative holdings in these uncertain economic times, these are three blue-chip stocks with strong fundamentals.
In fact, all three of these are components of the Dow Jones Industrial Index, meaning that they have stood the test of time, proving their merit through numerous economic cycles. Rain or shine, these top blue-chip stocks are set to prosper.
Visa (V)
Visa (NYSE:V) is one of the two dominant credit card networks. Along with Mastercard (NYSE:MA), these two leaders control a stunning 87% of the overall market.
That results in high-profit margins and strong network effects. Visa cards are found almost everywhere worldwide, and merchants have to accept them if they want access to most consumers.
Visa stock has traded largely flat over the past few years. The pandemic played a role in that, as lockdowns kept people stuck at home. This limited higher-value cross-border transactions, where Visa earns larger fees due to currency conversion. In addition, traders were worried about alternative technologies like cryptocurrency that could disrupt Visa.
Now, though, things are looking better. Global travel volumes are back to record highs, leading to a revival in profits for Visa. In addition, cryptocurrency has been plagued by scandals. Meanwhile, another perceived threat, the Federal Reserve’s FedNow instant payments system, launched with far fewer banks than expected. With business booming and competitive threats failing to materialize, Visa stock is set for further gains.
Verizon (VZ)
Verizon (NYSE:VZ) is one of America’s three largest mobile phone network providers. The company also offers internet and related services.
After many years of stability, the telecom industry has fallen on hard times. Verizon and its competitors have invested heavily in 5G deployments with only modest returns on the investment. Increasing competition from cable companies hasn’t helped matters either. Throw in rising interest rates on the firms’ large debt loads, and it’s understandable why traders have sold down the telecom stocks.
However, Verizon is in much better shape than some of its rivals, such as AT&T (NYSE:T). Despite that positive, VZ stock has fallen by nearly half since its 2020 peak. That is an excessive drop for a blue-chip company with strong cash flows like Verizon.
Shares now go for just seven times forward earnings and offer a juicy 7.6% dividend yield. Investors generally do well buying blue-chip stocks at such an attractive starting valuation.
Coca-Cola (KO)
Warren Buffett is famous for his long-term investment in Coca-Cola (NYSE:KO). The Oracle of Omaha has made a fortune from his insight that Coca-Cola could generate enduring returns thanks to providing consumers with an affordable luxury they could enjoy every day.
Decades later, Coca-Cola remains one of the world’s ten most valuable brands. Its global distribution system and wide range of products also serve Coca-Cola well. While many consumers aim to reduce sugared soda consumption, Coca-Cola has successfully grown its water, juices, and diet soft drink businesses to compensate.
Coca-Cola’s strong brand also allows it to thrive during inflationary times; Coke can raise prices without losing too many customers. Beverages are also recession-resistant, as people still want a delicious drink during the day regardless of economic conditions. All told, KO stock is the perfect sort of blue-chip name to own for providing trustworthy growth and income in a volatile market.
On the date of publication, Ian Bezek held a long position in V and VZ stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
