Figuring out which blue-chip stocks to buy before the bull market returns can be a challenge. So far, declines on Wall Street have pushed the major averages into bear market territory.
Macroeconomic uncertainty continues to add pressure to shares on Wall Street. Understandably, investors pay attention to the world’s biggest and most stable companies. These businesses have also survived numerous market downturns, bear markets and even recessions.
Research highlights that the S&P 500 has witnessed 26 bear markets since 1928. Yet, on the flip side, “there have also been 27 bull markets, and stocks have risen significantly over the long term.”
History reminds us that stocks lose about a third of their value during a bear market while they double in price in a bull market. The average duration of a bear market for the S&P 500 happens to be around a year. So, soon enough, the stock market green shoots might well be appearing.
That said, here are seven of the best blue-chip stocks to buy before the bull market begins.
|BRK-A ; BRK-B||Berkshire Hathaway||$429,819.44; $285.77|
|TDIV||First Trust NASDAQ Technology Dividend Index Fund||$50.59|
|DIA||SPDR Dow Jones Industrial Average ETF Trust||$322.28|
52-week range: $58.44 – $98.88
Archer-Daniels-Midland (NYSE:ADM) operates around 270 food procesing plants and more than 420 crop procurement facilities globally.
In late July, Archer-Daniels-Midland reported Q2 financials. Revenue grew from $22.9 billion to $27.3 billion. Adjusted diluted earnings per share (“EPS”) was $2.15, compared to $1.33 the previous year. Cash and equivalents totaled $906 million.
Recently, the company announced the launch of two joint ventures with South Korea-based LG Chem to produce lactic acid and polylactic acid in the U.S. The ventures are intended to meet the growing demand for plant-based products, including bioplastics.
Meanwhile, the new partnership with New Culture, which makes animal-free dairy food products, should facilitate the increased development and commercialization of alternative dairy products.
ADM stock has risen close to 30% year-to-date (YTD), and the dividend yield is 1.83% making it one of the blue-chip stocks to buy before the bull market returns. Shares are trading at 14.47 times forward earnings and 0.53 times sales. Lastly, the 12-month median forecast stands at $95.
Berkshire Hathaway (BRK-A) (BRK-B)
52-week range: $263.68 – $362.10
Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) owns numerous businesses in various sectors, including freight rail transportation, insurance, utilities, energy, retailing, manufacturing, and services. Among several of the best-known brands are Duracell, Fruit of the Loom, Geico, and Dairy Queen.
Berkshire Hathaway posted Q2 earnings on Aug. 6. Total revenue came in at $76.2 billion, up 10.2% compared to $69.1 billion in the previous-year period. Loss per Class B share was $19.84, compared to earnings per share of $12.33 a year ago. Cash and equivalents ended the quarter at $26.5 billion, down 68.9% from the level in 2021 end.
A quarterly 13F filing submitted to the Securities and Exchange Commission (SEC) on Aug. 15, shows more than 45 individual stocks in Berkshire’s portfolio, including Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC) and Chevron (NYSE:CVX). This makes BRK one of the more diverse blue-chip stocks to buy before the bull market returns
BRK-B stock has fallen just aound 6% since January. Shares are changing hands at 19.19 times forward earnings and 2.32 times sales. Wall Street’s 12-month median forecast is $356.85.
Bristol-Myers Squibb (BMY)
52-week range: $53.22 – $80.59
Global biopharmaceutical company Bristol-Myers Squibb (NYSE:BMY) develops and markets therapeutic drugs for oncology, immunology, cardiovascular and fibrosis. Management released Q2 results on July 27.
Revenues grew 2% year-over-year (YOY) to $11.9 billion. Non-GAAP EPS was $1.93 compared to $1.63 in the year-ago quarter. Cash and equivalents stood at $10.8 billion, down from $14 billion on Dec. 31, 2021.
The pharma giant has a strong product pipeline and expects several FDA approvals for new drugs making Squibb one of the blue-chip stocks to buy before the bull market returns.
In mid-August, the company completed the acquisition of Turning Point Therapeutics, expanding its precision oncology portfolio. With Turning Point’s lead asset, repotrectinib, Bristol-Myers will be able to address an unmet medical need for ROS1-positive non-small cell lung cancer patients.
So far, in 2022, BMY stock has returned more than 10%. The current price supports a dividend yield of 3.14%.
The company’s forward price-to-earnings (P/E) and price-to-sales (P/S) ratios are 8.34x and 3.19x, respectively. Finally, analysts’ 12-month price forecast for BMY stocks stands at $83.00.
52-week range: $191.74 – $293.96
Cigna (NYSE:CI), is one of the largest health insurers worldwide. The company offers dental, medical insurance and related products and services. It operates in more than 30 countries.
On Aug. 4, Cigna announced Q2 metrics. Total revenues were $45.5 billion, up 5.4% compared to $43.1 billion in the prior-year quarter. Adjusted EPS came in at $6.22. In the year-ago period, adjusted earnings were $5.24 per share.
The healthcare insurance giant is likely to benefit from the growth in the pharmacy benefit services, international health and U.S. commercial segments. Thus, management raised its EPS guidance for full-year 2022 by 30 cents to come in at least $22.90.
Cigna stock has returned aroung 25% since the beginning of the year. It currently yields a 1.56% dividend. Shares swap hands at 11.34 times forward earnings and 0.51 times sales. Lastly, analysts’ 12-month median price forecast for CI stock stands at $318.
First Trust NASDAQ Technology Dividend Index Fund (TDIV)
52-week range: $48.52 – $64.24
Expense ratio: 0.50% per year
The First Trust NASDAQ Technology Dividend Index Fund (NASDAQ:TDIV) invests in US-listed technology companies that pay regular dividends. This ETF started trading in August 2012, and tracks the dividend-weighted NASDAQ Technology Dividend Index. It has a portfolio of 90 holdings.
The semiconductors and semiconductor-equipment sectors have the largest industry exposure share (38.4%). Next are companies from the software sector (18.3%), IT services (10.9%), diversified telecommunications services (10.2%), electronic equipment, instruments, and components (6%), and communications equipment (5.6%).
Around 55% of $1.6 billion in net assets are allocated in the top ten stocks. Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM), Broadcom (NASDAQ:AVGO), Oracle (NYSE:ORCL), and Intel (NASDAQ:INTC) lead the names on the roster.
TDIV is down close to 22% since the start of the year. Yet, its current price supports a dividend yield of 2.41%. Trailing P/E and P/S ratios stand at 14.60x and 2.12x, respectively.
TDIV offers an excellent strategy for investors seeking long-term capital gains in high-quality tech companies while receiving a steady source of income today.
Ford Motor (F)
52-week range: $10.61 – $25.87
Ford Motor (NYSE:F), one of the global leaders in the automotive industry, primarily manufactures trucks, cars, sport utility vehicles, commercial vans and Lincoln luxury vehicles. Additionally, it develops autonomous vehicles and provides financial services through the Ford Motor Credit Company.
The industrial giant reported Q2 earnings on July 27. Revenue soared 50% YOY to $40.2 billion. Adjusted earnings were 68 cents per diluted share compared to 13 cents a year ago. Free cash flow ended the quarter at $3.6 billion.
Meanwhile, management confirmed its guidance for full-year 2022 despite the potential cost and inflation headwinds.
On July 21, Ford announced a series of initiatives to reach its targeted production of 600,000 electric vehicles (EVs) per year by late 2023. Recently, it introduced the all-new E-Transit Custom, the all-electric version of Europe’s best-selling van.
Ford stock has dropped more than 26% YTD. Yet, it still yields a hefty dividend of 3.93%.
The company’s forward P/E and P/S ratios are 7.12x and 0.41x, respectively. Finally, analysts’ 12-month median price forecast for Ford stands at $14.50.
SPDR Dow Jones Industrial Average ETF Trust (DIA)
52-week range: $296.39 – $369.50
Expense ratio: 0.16% per year
Our final pick for today could appeal to those who look to invest in a basket of blue chips rather than buying individual stocks. The SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) tracks the returns of its benchmark index, the Dow Jones Industrial Average (DJIA), the oldest continuous barometer of the U.S. stock market.
The fund has a portfolio of 30 large-cap U.S. stocks. It has amassed total net assets of $27.6 billion since its inception in January 1998.
In terms of sector allocations we see, health care (21.2%), information technology (20.3%), financials (15.9%), consumer discretionary (13.9%) and industrials (13.5 %).
The top 10 stocks comprise over half of the fund’s portfolio. Leading names include UnitedHealth Group (NYSE:UNH); Goldman Sachs (NYSE:GS); Home Depot (NYSE:HD); McDonald’s (NYSE:MCD); and Microsoft (NASDAQ:MSFT). Since the start of the year, DIA has dropped almost 13%.
The ETF currently yields a dividend of 1.93%. Trailing P/E and P/B ratios are 16.19x and 3.77x, respectively. Interested readers might regard any decline as an opportunity to invest in DIA before the bull market returns.
On the date of publication, Tezcan Gecgil, Ph.D., 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.