In investing, selecting the right blue-chip stocks can be the cornerstone of securing a stable and prosperous financial future. Here, the focus is on three blue-chip stocks with financial strength, market edge, and growth potential.
These elements make them top candidates to fortify portfolios. Certainly, blue-chip stocks can weather economic fluctuations, deliver constant returns, and uphold robust financial health. This makes them indispensable assets.
To begin with, the first company, a diversified multinational holding company, boasts a massive insurance float and a dominating investment edge. Similarly, the second one is a leading telecommunications giant that continues to make solid strides in broadband expansion and AI integration, cementing its status as a market leader in high-speed internet services.
Finally, the third company, celebrated for its monthly dividend payments, excels in high-quality real estate acquisitions and disciplined investment strategies. Together, these stocks offer a unique window for growth and stability.
Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) is a diversified multinational holding company with significant insurance operations and investment capabilities.
As of the first quarter, the insurance float stood at approximately $168 billion. This substantial amount indicates that Berkshire has significant funds at its disposal. The company can invest it to derive returns before claims are paid out. Moreover, the growth in the insurance float over the years showcases Berkshire’s ability to attract and manage a large volume of insurance business, enhancing its investment capacity. Hence, this leverage enables Berkshire to earn significant investment income.
For Q1, after-tax realized gains of $11.2 billion from the sale of investments. In contrast, Q1 2023 saw approximately $23.4 billion in unrealized gains and $1.7 billion in realized gains. This is along with a net remeasurement gain of $2.4 billion related to acquiring an additional 41.4% ownership interest in Pilot Travel Centers. Indeed, these unrealized gains and losses fluctuations reflect Berkshire’s substantial edge in market conditions.
Overall, Berkshire’s robust insurance float generates substantial investment income, driving profitability and making it a top pick among blue-chip stocks.
Verizon (VZ)
Verizon (NYSE:VZ) has significant leads in broadband growth and AI integration. The company added 389,000 total broadband net additions in the first quarter, including 53,000 Fios Internet net additions. This growth reflects the high demand for high-speed internet services.
Verizon added 151,000 fixed wireless access (FWA) net additions in its business segment and 203,000 in its consumer segment. As a result, the total FWA subscriber base is at 3.4 million, highlighting the lead of Verizon’s FWA offerings.
The company signed contracts with industry leaders like Xerox (NASDAQ:XRX) and Cummins (NYSE:CMI), as well as major sports leagues (NFL and NHL). These contracts demonstrate Verizon’s capability to derive high-quality revenue.
Further, the company achieved 250 million points of presence (POPs) covered by C-band, hitting the target almost a year ahead of schedule. The C-band rollout has led to a higher premium mix and reduced churn in the first 76 markets where it was implemented. The company’s AI strategy optimizes internal processes and product experiences and commercializes AI demand.
Verizon’s ability to secure major contracts and enhance its market base makes it a compelling choice on the blue-chip stocks list.
Realty Income (O)
Realty Income (NYSE:O) has a disciplined investment strategy, specializing in high-quality real estate acquisitions. After the Spirit Realty Capital merger, Realty Income’s annualized free cash flow available for investments is approximately $825 million.
Indeed, this substantial cash flow provides significant organic investment capacity without external funding. The company achieved a nominal first-year investment spread of over 3.4% in the first quarter, significantly above the historical average of around 1.5%. This high spread is primarily driven by investments funded through free cash flow, reducing the cost of capital.
Additionally, Realty Income maintains a balanced debt profile. The company has a net debt and preferred equity to an annualized pro forma adjusted EBITDA ratio of 5.5x, The company issued $1.25 billion in bonds with a blended yield to maturity of approximately 5.14%. This enhances liquidity while managing debt maturities sharply. Realty Income’s disciplined investment strategy focuses on acquiring high-quality real estate and maintains a long-term, risk-adjusted return approach. In the first quarter, Realty Income completed $598 million of investments at an initial weighted average cash yield of 7.8%.
Finally, with a balanced debt profile and a strategic focus on profitable investment opportunities, Realty Income is a reliable pick among top blue-chip stocks.
As of this writing, Yiannis Zourmpanos held long positions in VZ and O. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
