The current market downturn is a tense and risky time for investors. However, this also presents an opportunity to buy undervalued blue chip stocks that are being pulled lower along with the broader economy in this downtrend. These established, well-managed companies will continue to deliver strong earnings even though their stock prices could decline further as we potentially slide into another economic crisis.
With the end of quantitative easing, a lot has changed in the way markets work. One thing is clear, while growth stocks were once preferred over value stocks, they are no longer safe either.
Additionally, investors are increasingly aware that blue chip stocks represent proven and profitable businesses. A company that maintains a dominant position and generates profits is safe for investors because interest rates rise over time, which should mean more money flowing into these companies to boost stock prices.
Goldman Sachs (GS)
investment bank Goldman Sachs (NYSE:GS) has been a cash flow generating machine over the past few years. The company had a penchant for finding new ways to generate money despite the inconsistency of the market.
This was evidenced by its better-than-expected performance in the second quarter, where it delivered strong results for its global market and consumer wealth management businesses. In addition, he announced a 25% increase in dividends.
Commission revenue will propel sales at the bank’s incredible pace of earnings in the second quarter. Additionally, with expectations of further increases in fee income from its wealth management and asset management divisions, it expects revenue to rise 25% in the next quarter. Despite its resilient performance, its stock trades at just 2.16 times forward sales.
PepsiCo (NASDAQ:DYNAMISM) has once again proven that its plethora of snack and drink brands resonate hugely in the market.
He had another amazing quarter with a 13% increase in organic sales and a 10% improvement in operating profit. Experts believed that rising inflation rates would hurt its profit margins; However, PepsiCo held up remarkably well.
The drinks and snacks giant has easily increased its revenue and profits in the current economic climate. Moreover, it reinforced its already bullish outlook, expecting organic growth of 10% for the year against an initial forecast of 6%. Additionally, it will bring $8 billion in cash to shareholders this year while earning nearly 3%.
Home deposit (NYSE:HD) is the leading home improvement retailer in the United States, operating over 2,300 stores in the North American region.
The company generated $151 billion in revenue last year, representing a 14% year-over-year increase. HD is now in a tough spot in tough market conditions including higher inflation and interest rates. The cracks showed up in its recent operating results.
Despite its short-term issues, HD has been an incredibly resilient business and a huge generator of wealth. It has grown in sales by more than 9.50% over the past five years and has returned almost 500% to investors over the past decade.
Moreover, it has consistently generated free cash flow over the past few years; therefore, 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:SAY) was more appealing. Over the past six months, DIS stock has sold off a bit and is trading near its 52-week low.
Nonetheless, his business has ignited with his Disney+ streaming service starring the show. The service had 137.7 million subscribers at the end of the second quarter, a monumental jump from the 26.5 million subscribers it had in the first quarter of 2020. That’s more than 50% of its goal of reaching 230 million to 260 million subscribers by the conclusion of 2024.
In addition, its national parks business also flourished rapidly. The division posted its highest ever second quarter revenue, despite the effects of omicron. Add to that Disney’s massive content lineup and the success of its recently released feature films, and it just might be the pick of the entertainment stocks right now.
Footwear and sportswear giant Nike (NYSE:NKE) has held up well against some major short-term headwinds. Its recent results have demonstrated the success of its strategy of expanding its direct-to-consumer sales (CPD) channel.
Over the past five years, it has aggressively expanded its physical stores and e-commerce offerings. It has effectively reduced reliance on intermediaries and strengthened its engagement with its consumers.
Its DTC business is under the “Nike Direct” umbrella, which has historically been the fastest growing sector in the space. It accounted for 40% of its sales in fiscal 2022, and its chief financial officer Mathew Friend believes that “Nike Direct will lead our growth and Nike Digital will be our fastest growing channel” by then. ‘next year. She also reiterated her long-term goal of achieving approximately 60% of her sales with Nike Direct.
TJX Companies (TJX)
Massachusetts-based discount retailer TJX Companies (NYSE:TJX) has been a leading off-price retailer, benefiting immensely from its flexible business model.
Its business model is to source from more than 21,000 suppliers in 100 countries, selling products at 20-60% lower prices. From fiscal year 2012 to 2022, it increased its number of stores from 2,905 to 4,689 locations.
It surprised its investors with its first quarter results, where pre-tax margins rose to 9.4% from 7.2% in the same period last year. The overall availability of quality goods in the market remains huge despite supply chain issues.
Its CEO, Ernie Herrman, said the company’s performance in the first quarter shows that its off-price business model has effectively weathered the challenges presented at that time. Therefore, the future looks remarkably bright for TJX.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is a leading defense contractor that has delivered immense value to investors over the years. Defense contractors have been a focus since Russia invaded Ukraine.
It is likely to lead to a substantial increase in defense spending; these deals take time, so the short-term impact on sales and profits is likely to be minimal.
It released second-quarter results, which were disappointing as it missed revenue and profit estimates. Lower industry volume and lower demand for F-35s led to lower revenues and operating profits across all of its divisions.
Nonetheless, it remains an excellent value play with an A+ dividend profile. Furthermore, the windfall expected from European orders remains a major catalyst for the future.
As of the date of publication, Muslim Farooque had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.