The current market downturn is a tense and risky time for investors. However, it also presents an opportunity to purchase undervalued blue-chip stocks to buy that are being pulled down with the wider economy in this bear trend. These well-run established companies will continue producing robust earnings even though their share prices may go down further as we potentially fall into another economic crisis.
With the end of quantitative easing, many things have changed in how markets function. One clear thing is that while growth stocks were once favored over value ones, they’re no longer safe either.
Moreover, investors are increasingly aware that blue chip stocks represent proven, profitable businesses. A company maintaining a dominant position and producing profits is safe for investors as interest rates rise over time — which should mean more money flowing into such firms to raise share prices.
Goldman Sachs (GS)
Investment bank Goldman Sachs (NYSE:GS) has been a cash flow generating machine over the past several years. The firm has had a penchant for finding new ways to generate money despite the in conduciveness of the market.
This is evidenced in its better-than-expected second-quarter performance, where it posted strong results for its global market and consumer wealth management businesses. Additionally, it announced a 25% hike in dividends.
Fee revenues will drive sales to the bank’s incredible earnings beat during the second quarter. Moreover, with expectations of a further bump in fee revenue from its wealth management and assets management divisions, it expects a 25% revenue spike in the upcoming quarter. Despite its resilient performance, its stock trades at just 2.16 times forward sales.
PepsiCo (NASDAQ:PEP) once again proved that its plethora of snacks and beverages brands resonate immensely with the market.
It dished out another incredible quarter with a 13% increase in organic sales and a 10% improvement in operating profits. Experts believed that the rising inflation rates would hurt its profit margins; However, PepsiCo has held up remarkably well.
The beverage and snack giant has easily boosted revenues and profits in the current economic climate. Moreover, it boosted its already bullish outlook, expecting 10% organic growth for the year from an initial forecast of 6%. Additionally, it will return $8 billion in cash to shareholders this year while yielding close to 3%.
Home Depot (HD)
Home Depot (NYSE:HD) is the top home improvement retailer in the U.S., operating over 2,300 stores in the North American region.
The company generated a whopping $151 billion in sales just last year, representing a 14% bump on a year-over-year basis. HD is now in a tough spot amidst challenging market conditions, including higher inflation and interest rates. The cracks have shown in its recent operating results.
Despite its short-term troubles, HD has been an incredibly resilient company and a massive wealth compounder. It has grown its sales by over 9.50% in the past five years and has returned almost 500% to investors in the past decade.
Moreover, it has consistently generated free cash flows over the past several years; hence, investing in the stock during the current downturn would be a wise choice at this time.
The long-term risk/reward entertainment giant Disney (NYSE:DIS) has been more attractive. In the past six months, DIS stock has sold off a fair bit and trades close to its 52-week low price.
Nevertheless, its business has been firing with its streaming service Disney+ the star of the show. The service boasted 137.7 million subscribers at the end of the second quarter, a monumental jump from the 26.5 million subscribers it had during the first quarter of 2020. That is over 50% of its goal to achieve 230 million to 260 million subscribers by the conclusion of 2024.
Furthermore, its domestic parks business has also been thriving rapidly. The division reported its highest ever second quarter sales figure, despite the effects of omicron. Layer that up with Disney’s massive content lineup and the success of its recently released feature films, and it’s perhaps the pick of the entertainment stocks at this time.
Footwear and athletic apparel giant Nike (NYSE:NKE) has done well in the face of some major near-term headwinds. Its results of late have shown the success of its strategy to expand its direct-to-consumer (DTC) channel.
Over the past five years, it has aggressively expanded its brick-and-mortar stores and eCommerce offerings. It effectively reduced the dependence on intermediaries and strengthened its engagement with its consumers.
Its DTC businesses are under the “Nike Direct” umbrella, which has consistently been the fastest growing sector in the space. It has accounted for 40% of its sales in fiscal 2022, and its CFO Mathew Friend is of the opinion that “Nike Direct will lead our growth and Nike Digital will be our fastest-growing channel” by next year. It also reiterated its long-term goal of making approximately 60% of its sales from Nike Direct.
TJX Companies (TJX)
Massachusetts-based discount retailer TJX Companies (NYSE:TJX) has been one of the top off-price retailers benefiting immensely from its flexible business model.
Its business model involves sourcing products from more than 21,000 vendors across 100 countries, selling products at 20% to 60% lower prices. From fiscal 2012 to 2022, it increased its store count from 2,905 to 4,689 locations.
It surprised its investors with its first-quarter results, where pretax margins rose to 9.4% from 7.2% in the same period last year. Overall availability of quality merchandise in the marketplace remains tremendous despite supply chain troubles.
Its CEO Ernie Herrman felt that the company’s first-quarter performance shows that its off-price business model has effectively weathered the challenges presented at this time. Therefore, the future looks remarkably bright for TJX.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is a leading defense contractor that has offered immense value to investors over the years. Defense contractors have been in focus since Russia’s invasion of Ukraine.
It is likely to result in a substantial uptick in defense spending; these deals take time, so the impact on near-term sales and earnings is likely to be minimal.
It reported second-quarter earnings, which were disappointing as it missed estimates on revenues and earnings. A drop in volume in the sector and a decline in demand for F-35s have led to declining revenues and operating profits throughout its divisions.
Nevertheless, it remains an excellent value play with an A+ dividend profile. Moreover, the expected windfall from European orders remains a major catalyst for the future.
On the date of publication, Muslim Farooque did not have (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.