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4 Blue Chip Stocks That Have a Killer Advantage

Blue-chip stocks are known for their ability to endure harsh economic downturns and protect investors from market volatility. So, while rising inflation concerns are threatening the surging equity markets, we think blue-chip stocks Microsoft (MSFT), Johnson & Johnson (JNJ), Walmart (WMT), and PepsiCo (PEP) should be valuable additions to one’s portfolio. Read on to learn why.

Blue chip stocks represent established industry leaders that can keep their businesses ticking over even during adverse economic conditions. These stocks tend to be safe investment bets amid market volatility. Blue-chip stocks have continued to grow substantially despite the current market volatility and inflationary concerns.

This is evidenced by the blue-chip Dow Jones Industrial Average’s (DJIA) 12% gains year-to-date. Indeed, the DJIA hit its 35,091.56 all-time high on May 10, 2021.

While equity markets are currently surging, broader macroeconomic concerns could  precipitate a correction soon. So, we think betting on blue-chip stocks Microsoft Corporation (MSFT), Johnson & Johnson (JNJ), Walmart Inc. (WMT), and PepsiCo, Inc. (PEP) could help hedge one’s portfolio against a potential market correction.

Microsoft Corporation (MSFT)

MSFT  is one of the largest software companies in the world, operating in three segments: Productivity and Business Processes, Intelligent Cloud and More Personal Computing.

On June 24, MSFT officially introduced Windows 11, which is designed to provide its customers with a fresh perspective. This demonstrates MSFT’s unique  ability to innovate and upgrade to meet  market demand.

On June 2, MSFT formed  a partnership with Morgan Stanley (MS) to accelerate the financial institution’s digital transformation. The companies are also set to develop and co-design new application infrastructure for the  financial services industry. This partnership with one of the biggest investment banking companies worldwide should allow MSFT to scale its operations and improve its financials substantially.

On May 12, Micro Focus announced its collaboration with MSFT to facilitate digital transformation of state and local governments. This collaboration is likely to increase MSFT’s revenues substantially because  government  agencies are investing heavily to digitize their operations.

MSFT’s revenues increased 19.1% year-over-year to $41.7 billion in its  fiscal third quarter, ended March 31. Its income from continuing operations grew 31.4% from its year-ago value to $17.05 billion. MSFT’s net income was  $15.46 billion, indicating a 43.8% rise year-over-year. The company’s EPS increased 45% year-over-year to $2.03.

The Street expects MSFT’s revenues to rise 16% year-over-year to $44.10 billion in the current quarter (ending June 2021). A $1.90  consensus EPS estimate for the current  quarter indicates a 30.1% improvement year-over-year. The company has an impressive earnings surprise history as well; it beat the consensus EPS estimates in each of the trailing four quarters. Shares of MSFT have gained 36.9% over the past year, and 20.8% year-to-date.

It’s no surprise that MSFT has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

MSFT has a B grade for Stability, Sentiment, and Quality. Among the 129 stocks in the Software - Application industry, MSFT is ranked #16. We also provide Growth, Momentum, and Value grades for MSFT, which you can find here.

Click here to check out our Software Industry Report for 2021

Johnson & Johnson (JNJ)

JNJ is an established pharma company that researches and develops, manufactures and sells a range of healthcare products. The New Brunswick, N.J. company operates through three segments: Consumer, Pharmaceutical and Medical Devices.

On June 21, JNJ company added Enseal X1 Curved Jaw Tissue Sealer to its Advanced Biopolar Energy Portfolio. This demonstrates JNJ’s innovative prowess and growth potential.

On April 23, the company resumed its COVID-19 vaccine roll out for all adults in the United States. This should significantly contribute to the company’s revenues in the coming quarters as the country races to vaccinate its entire population.

JNJ’s reported sales increased 7.9% year-over-year to $22.32 billion in its  fiscal first quarter, ended March 31. Its gross profit grew 12% from its  year-ago value to $15.26 billion, while its net income improved 6.9% year-over-year to $6.20 billion. The company’s non-GAAP adjusted EPS increased 12.6% year-over-year to $2.59.

Analysts expect JNJ’s revenues to increase 26% year-over-year to $22.19 billion in the current quarter, ending June 30, 2021. A $2.26 consensus EPS estimate for the current  quarter indicates a 35.3% rise from the same period last year. Furthermore , JNJ surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive.

Shares of JNJ have gained 19% over the past year. The stock has gained 7.1% over the past six months to close yesterday’s trading session at $164.03.

It is no surprise that JNJ has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The stock has an A grade for Stability, and a B grade for Value, Growth, Quality, and Sentiment. Among the 225 stocks in the Medical - Pharmaceuticals industry, JNJ is ranked #1. To see more of JNJ’s component grades, click here.

Click here to checkout our Healthcare Sector Report for 2021

Walmart Inc. (WMT)

WMT is the largest retailer in the world. It operates in 24 countries, with e-commerce websites offering a wide range of daily needs items. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.

On June 24, WMT announced that the Walmart MoneyCard issued by Green Dot (GDOT) will now be offered as a demand deposit account to enhance customer convenience and deliver  exclusive cash back services.

On June 17, WMT’s CEO unveiled its partnership with DroneUp to create a delivery network operated by drones. This should allow WMT to strengthen its e-commerce business and expand its market reach, while reducing its operating costs.

On May 27, WMT and Gap Inc. (GPS) formed  a strategic partnership to launch Gap’s new home collection exclusively on Walmart’s retail platform, which was scheduled to be available from June 24 onwards. This partnership should enable WMT to attract more customers in the WMT zone with the addition of GAP’s signature collection.

WMT’s net sales increased 2.6% year-over-year to $137.16 billion in its  fiscal first quarter, ended April 30. Its operating income grew 32.3% from its  year-ago value to $6.91 billion. WMT’s revenues were  $138.31 billion, indicating a 2.7 % rise year-over-year. Its cash and cash equivalents balance rose 52.8% from the prior year quarter to $22.89 billion over this period.

A $567.47 billion  consensus revenue estimate for the next year indicates a 2.5% increase year-over-year. The Street expects the company’s EPS to rise 4.7% to $6.25 next year. Also, the company beat  consensus EPS estimates in three  of the trailing four quarters. Shares of WMT have gained 16.7% over the past year to close yesterday’s trading session at $137.30.

It is no surprise that WMT has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The stock also has an A grade for Stability and Sentiment, and a B grade for Value, Momentum, and Quality. Among the 39 stocks in the A-rated Grocery/Big Box Retailers industry, WMT is ranked #2. To see additional POWR Ratings, click here.

PepsiCo, Inc. (PEP)

PEP is a food and beverage company operating in over 200 countries. The Harrison, New York-based concern  operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and  Asia Pacific, Australia and New Zealand and the China Region.

On June 24, Fritos®, one of the flagship brands from PepsiCo's Frito-Lay division, collaborated with Papa Murphy's®, the largest Take 'n' Bake pizza brand in the nation to introduce a new limited-edition pizza. This collaborative effort  by the two leading brands should allow PEP to generate significant revenues.

On May 28, PEP partnered with FAT (Fresh. Authentic. Tasty.) Brands Inc., with the goal of  diversifying its food and beverage portfolio and enhancing customer experience.

PEP’s net revenues increased 6.8% year-over-year to $14.82 billion in its  fiscal first quarter, ended March 20. Its operating profit grew 20.2% from its  year-ago value to $2.31 billion. PEP’s net income came in at $1.71 billion, indicating a 28.1% rise year-over-year. The company’s EPS increased 29.2% year-over-year to $1.24.

The Street expects PEP’s revenues to increase 16.7% year-over-year to $17.94 billion in its fiscal second quarter, ending June 2021. A  $1.52 consensus EPS estimate  for the current  quarter indicates a 15.2% rise from the same period last year. PEP also has a notable earnings surprise history; it beat the consensus EPS estimates in each of trailing four quarters. Shares of PEP have gained 14.1% over the past year to close yesterday’s trading session at $146.94.

PEP has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. PEP also has a B grade for Stability, Sentiment, and Quality. It is ranked #5 in the Beverages industry.

Beyond what we’ve stated above, we have also rated PEP for Value, Momentum ,and Growth. Click here to view all PEP ratings.


MSFT shares were trading at $270.64 per share on Wednesday afternoon, down $0.76 (-0.28%). Year-to-date, MSFT has gained 22.24%, versus a 15.24% rise in the benchmark S&P 500 index during the same period.



About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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