While many investors are focused on the rapid moves we are witnessing in growth stocks lately, there’s always a place for strong blue-chip stocks in a portfolio.
These are some of the biggest companies in the world that are often viewed as a stable and secure place to park long-term capital given their established business models and history of strong earnings.
With the Dow Jones Industrial Average taking a backseat to other indices over the last few weeks, now might be a great time to take a look at some of the best blue-chip stocks that have pulled back or are consolidating.
These stocks might not be the most exciting names, but what is compelling about them is the long-term alpha they can provide to accounts. Keep in mind that many blue-chip stocks have a long history of dividend growth and are less volatile than many of the other high-flying sectors in the market, which are both very attractive qualities.
Let’s take a further look at the 3 best blue-chip stocks to buy now.
1. Raytheon Technologies (NYSE:RTX)
First up is Raytheon Technologies (NYSE:RTN), a blue-chip aerospace and defense company that is nicely poised to benefit from a rebound in commercial air traffic this year. Raytheon sells aerospace products that support commercial aviation markets along with defense and intelligence products that are consistently bought by government and military agencies.
The company offers a nice balance between the two sides of its business, which means it can successfully handle any big downturns in either segment. There’s also the fact that Raytheon took several cost-cutting measures during the pandemic that should result in stronger operating margins going forward.
Defense companies are attractive at the moment particularly since we know there are heightened geopolitical tensions, and there are many components of Raytheon’s business that are prioritized by the National Defense Strategy, including its missile and missile defense segment.
Raytheon stock has rallied over 24% year-to-date and pays a 2.35% dividend yield, and it’s potentially one of the best ways to play the rebound in the commercial airline industry at this time.
2. Home Depot
Home Depot (NYSE:HD) is the type of stock that almost any long-term investor can feel comfortable adding to their portfolios thanks to its long history of steady dividend growth and its reliable business model. It’s the world’s largest home improvement retailer and a company that has benefitted from a very strong housing market over the last year.
However, with lumber prices pulling back sharply, and a real estate market that will likely return to a more normal pace soon, shares of Home Depot have recently sold off a bit. The dip should be considered a great buying opportunity for investors that want exposure to one of the premier discretionary retail stocks.
Did you know that roughly 70% of U.S. homes are over 25 years old? That means Home Depot is poised to benefit from remodeling and home improvement projects for years to come, even if the torrid pace in home buying slows down.
It’s also worth mentioning that Home Depot has returned $56 billion to shareholders over the past 5 years in the form of dividends and share buybacks, which tells us that the company is committed to rewarding long-term investors.
In Q1, the company reported EPS of $3.86, up 86% year-over-year, and it wouldn’t be surprising to see this earnings momentum continue throughout 2021. Finally, the fact that we are getting deeper into summer could be another reason to add shares of Home Depot, as homeowners tend to spend more on outdoor projects like decks and backyard equipment during this season.
3. Danaher
Companies involved in health care equipment and supplies are in the spotlight thanks to the global pandemic, and Danaher Corporation (NYSE:DHR) is a blue-chip name in the industry that could be a very strong buy. Danaher is a diversified Life Sciences and diagnostics company with operations all over the world.
As a company that offers important research tools that scientists need to improve healthcare, crucial diagnostics products used in hospitals and physicians’ offices, and environmental and applied solutions products and services that help to keep global food and water supplies safe, Danaher is a business with products that make the world a better place.
The company has received a nice boost to its sales thanks to global efforts to develop COVID-19 testing and vaccines, and Danaher’s recent $21.4 billion acquisition of General Electric’s Biopharma business Cytiva back in 2020 should be a nice growth driver for the company in the long-term.
This is a blue-chip stock involved in attractive niche healthcare markets with high barriers to entry, and investors should certainly be attracted to Danaher’s strong recurring revenue streams and impressive backlog.