In the stock market, finding solid blue-chip stocks can lead to substantial portfolio growth. While the hype of flashy stocks often gets headlines, the steady performers driving constant returns truly boost portfolios. The article lists three such hidden gems. These blue-chip stocks operate in diverse sectors—consumer staples, pharmaceuticals and healthcare equipment. Each company has its own unique growth trajectory and market strategies.
The first one, amidst macroeconomic challenges, holds resilience, leveraging strategic investments to drive brand strength and market share. The second one’s relentless focus on innovation and strategic acquisitions positions it at the forefront of pharmaceuticals. Meanwhile, the third has diverse business segments that offer stability and growth potential even during market volatility. From the first one’s solid management of working capital to the second one’s progressive pipeline and the third one’s edgy performance across segments, each company presents high-value investment potential.
Explore how the fundamentals may unlock the potency of these hidden gems in the stock market.
Conagra (CAG)
Conagra (NYSE:CAG) delivers solid performance and derives solid free cash flows. Despite macroeconomic challenges and shifts in consumer behavior, the company maintained solid margins, EPS and related free cash flow conversion. For instance, there is a considerable improvement in free cash flow generation, with free cash flow in H1 fiscal 2024 nearly six times higher than in H1 fiscal 2023. This substantial increase in free cash flow reflects Conagra’s edgy management of working capital, inventory levels and capital expenditure, leading to improved liquidity.
Additionally, the company utilized its solid free cash flow to pay down debt, reducing its net leverage ratio to 3.55x in Q2. This proactive debt reduction strategy demonstrates Conagra’s focus on strengthening its balance sheet and enhancing flexibility to support growth initiatives and valuation boosts.
Furthermore, Conagra has implemented a multifaceted investment plan to drive brand building and stimulate consumer demand in fiscal 2024. Specifically, investments in advertising, innovation support and merchandising have solidified major brands such as Birds Eye, Healthy Choice and Slim Jim. Hence, these investments aim to re-engage consumers, capture market share and drive momentum in major product categories.
Moreover, Conagra delivered an edgy performance in its international and food service segments during Q2 fiscal 2024, leading to its overall top-line growth and market expansion. The organic net sales growth of 5.6% in the international segment is based on solid execution, brand activation, and expanded distribution in major markets such as Mexico and Canada. Similarly, the food service segment delivered organic net sales growth of 4.3% in the quarter, driven by a favorable price mix and expanded distribution in the frozen portfolio.
Overall, the International segment’s consecutive quarters of volume growth in Mexico suggest the edge of Conagra’s strategies in capturing market share and driving demand in diverse geographic regions.
Pfizer (PFE)
Pfizer’s (NYSE:PFE) valuation is mainly supported by its solid pipeline and strategic moves. The company achieved nine new molecular entity approvals in 2023. Pfizer’s record year for Food and Drug Administration (FDA) approvals signifies its solid pipeline execution.
With nine new molecular entity approvals, Pfizer demonstrates its fundamental capability to bring novel drugs and therapies to market, addressing unmet medical demand and expanding its product portfolio. These approvals represent considerable milestones that drive top-line growth and market leadership, positioning Pfizer for continued success and expansion in the pharmaceutical industry.
Additionally, Pfizer closed the Seagen acquisition, doubling its oncology research and resources. The acquisition of Seagen represents Pfizer’s strategic focus on strengthening its oncology portfolio. By doubling its oncology research and resources overnight, Pfizer considerably boosts its capabilities in developing innovative cancer therapies. This acquisition expands Pfizer’s market presence and offers potency for portfolio expansion and top-line growth. Further, Pfizer has a fundamental capability to channel regulatory processes and successfully close such a large acquisition, indicating its strategic agility and competence in seizing growth potential.
Looking ahead, Pfizer outlines five clear strategic priorities for 2024. Pfizer’s clear strategic priorities provide a sustainable growth and value-creation roadmap. By focusing on achieving world-class oncology leads, delivering pipeline innovation, maximizing new product performance, expanding the bottom line and enhancing market value, Pfizer aligns its efforts with major growth drivers.
Overall, these priorities reflect Pfizer’s focus on strategic execution and a value boost. Hence, this establishes the company for accelerated growth and a competitive edge in pharmaceuticals.
Abbott (ABT)
Abbott’s (NYSE:ABT) focus on research and development (R&D) is indicated by accelerated investments in the pipeline. This can be observed in the leading announcements of over 25 new growth opportunities in the last two years. These opportunities hold various aspects, such as new products, indications, geographic expansions and reimbursement expansions.
Additionally, Abbott operates in diverse business segments, including established pharmaceuticals (EPD), nutrition, diagnostics, and medical devices. Each segment has specific growth potential. For instance, EPD attained three consecutive years of double-digit sales growth (in Q4 2023). Similarly, nutrition sales increased by 14% in Q4, with adult nutrition segment sales surpassing $4 billion and growing by 13.5%. Likewise, core laboratory diagnostics saw growth of nearly 10%, driven by the success of the Alinity suite of systems.
Fundamentally, the diversity of revenue from these segments mitigates risk and provides stability. Abbott’s market lead in segments like pediatric and adult nutrition and continuous glucose monitoring systems (e.g., Freestyle Libre) suggests the competitive edge of its diverse business portfolio.
Abbott has constantly exceeded sales and earnings expectations at the consolidated level, suggesting resilience across its business segments. Sales growth, excluding COVID testing, has been constantly in double digits and increasing by more than 11% in 2023, exceeding the original guidance of high single-digit growth. At the bottom line, adjusted earnings per share finished the year at $4.44, above the midpoint of the original guidance range. Thus, despite adversities like lower-than-expected COVID testing sales, Abbott achieved double-digit earnings growth on the base business.
Overall, Abbott’s portfolio and its fundamental capability to deliver top-tier sustainable performance lead to solid valuation growth potential.
As of this writing, Yiannis Zourmpanos held long positions in CAG and PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
