In this article, we will take a look at 12 best blue chip stocks that outperformed in 2022. If you want to see more best blue chip stocks that outperformed in 2022, go directly to 5 Best Blue Chip Stocks That Outperformed in 2022.
2022 has been a challenging year for the markets as the Federal Reserve has increased interest rates substantially to fight inflation. As a result of the interest rate increases, demand for some companies have weakened and valuations in the overall market have decreased as capital has moved from equities to Treasuries.
With the headwinds, all three of the major market indexes have declined year to date in 2022 with the S&P 500 down 16.2%, the Dow Jones Industrial Average down 6.77%, and the tech heavy Nasdaq down 28.9%.
Of the three indexes, it's not surprising that the Dow Jones Industrial Average has fallen the least given that the index is comprised of blue chip stocks.
Blue chip stocks are stocks of well-known leading companies with substantial competitive advantages. Many blue chips have strong histories of increasing earnings over time and returning capital back to shareholders through dividends or stock repurchases.
While the S&P 500 and NASDAQ have blue chip stocks as well, the S&P 500 and NASDAQ index include many medium sized and smaller companies that the Dow Jones Industrial Average doesn't.
November Inflation Data
While the three indexes are down this year, the market has rallied since October as inflation has shown signs of potentially peaking.
For the month of November, the consumer price index rose 7.1% year over year versus estimates of an increase of 7.3% year over year. Meanwhile, the core CPI rose only 6% year over year on an annual basis versus estimates of 6.1% year over year. The better than expected inflation numbers for November followed better than expected numbers for October as well.
Given the recent inflation numbers, it remains to be seen what the Federal Reserve will do in the near term as the U.S. central bank has said one month of good data isn't enough.
Federal Reserve Chairman Jerome Powell said in November, "While October inflation data received so far showed a welcome surprise to the downside, these are a single month's data, which followed upside surprises over the previous two months. As figure 1 makes clear, down months in the data have often been followed by renewed increases. It will take substantially more evidence to give comfort that inflation is actually declining. By any standard, inflation remains much too high."
If two months isn't good enough either and the Federal Reserve raises rates too much, it could slow the economy and cause a recession next year. If economic data fails to meet expectations, there could be more downside.
If rates don't go up too much further, however, the economic slowdown might not be as bad as expected. Given the market decline so far, the stocks of some quality blue chips could trade for attractive valuations in the long term as a result.
Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
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Methodology
For our list of 12 Best Blue Chip Stocks That Outperformed in 2022, we took 12 of the best performing Dow Jones Industrial Average stocks in terms of their year to date performance.
We then ranked them based on the number of hedge funds in our database that held shares in the same stock at the end of the third quarter.
12. Travelers Companies, Inc. (NYSE:TRV)
Year to Date Return as of December 13: 20.10%
Number of Hedge Fund Holders: 37
Insurance giant Travelers Companies, Inc. (NYSE:TRV) has surged 20.10% year to date in 2022 thanks to rising interest rates which could help the company realize more yield from its investments.
Earnings have also been strong as Travelers Companies, Inc. (NYSE:TRV) reported Q3 core EPS of $2.20 on sales of $9.3 billion versus the consensus of $1.60 on sales of $8.98 billion. Adjusted book value rose 7% year over year to $111.90 per share and the company's net written premiums rose 10% year over year to $9.198 billion.
Alongside Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and UnitedHealth Group Inc. (NYSE:UNH), Travelers Companies, Inc. (NYSE:TRV) is a blue chip that has outperformed the market in 2022.
11. International Business Machines Corporation (NYSE:IBM)
Year to Date Return as of December 13: 10.68%
Number of Hedge Fund Holders: 40
While it may have lagged the market in previous years,International Business Machines Corporation (NYSE:IBM)'s 10.68% increase is certainly better than the S&P 500's decrease of 16.2% in 2022.
In the third quarter, the tech giant reported EPS of $1.81 on sales of $14.1 billion versus the average estimate of $1.77 on sales of $13.51 billion. For FY22, International Business Machines Corporation (NYSE:IBM) expects around $10 billion in consolidated free cash flow, which is more than enough to cover the company's annual dividend payments of around $6 billion.
International Business Machines Corporation (NYSE:IBM) CEO Arvind Krishna said, "IBM delivered strong revenue growth in the quarter, reflecting our continued focus on the execution of our strategy. Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio. With our year-to-date performance, we now expect full-year revenue growth above our mid-single digit model."
Of the around 920 hedge funds in our database at the end of Q3, 40 owned shares ofInternational Business Machines Corporation (NYSE:IBM), ranking the company #11 on our list of 12 Best Blue Chip Stocks That Outperformed in 2022.
10. Caterpillar Inc. (NYSE:CAT)
Year to Date Return as of December 13: 13.76%
Number of Hedge Fund Holders: 43
Construction equipment maker Caterpillar Inc. (NYSE:CAT) shares are near an all time high givensome analysts think infrastructure projects could lead to more demand in the machinery sector in what could be a multiyear cycle. There could also be growth opportunities for Caterpillar Inc. (NYSE:CAT) in autonomy and automation in the next decade as well.
As a result of the expected demand growth, analysts think Caterpillar Inc. (NYSE:CAT) will earn $13.88 per share in 2022, $15 per share in 2023, and $16.64 per share in 2024.
43 hedge funds in our database held shares of Caterpillar Inc. (NYSE:CAT) at the end of the third quarter.
9. Honeywell International Inc. (NYSE:HON)
Year to Date Return as of December 13: 3.95%
Number of Hedge Fund Holders: 53
Industrial conglomerate Honeywell International Inc. (NYSE:HON) stock rallied 3.95% year to date given strong earnings. For the third quarter, Honeywell International Inc. (NYSE:HON) reported EPS of $2.25 on sales of $8.95 billion versus estimates of $2.16 on revenue of $8.98 billion. Although sales were slightly lower than expected, Honeywell International Inc. (NYSE:HON)'s earnings for the quarter exceeded the high end of its adjusted EPS guidance.
For FY22, Honeywell International Inc. (NYSE:HON) sees EPS of $8.70-$8.80 versus the consensus of $8.66.
8. Amgen Inc. (NASDAQ:AMGN)
Year to Date Return as of December 13: 20.10%
Number of Hedge Fund Holders: 53
Biotech giant Amgen Inc. (NASDAQ:AMGN) shares have surged 20.10% year to date as the market expects the company's earnings to rise in the future.
In terms of average estimates, analysts expect Amgen Inc. (NASDAQ:AMGN) to earn $17.67 per share in 2022, $18.38 per share in 2023, and $20.32 per share in 2024. In terms of revenue, there is potential for more growth as well given Amgen Inc. (NASDAQ:AMGN) recently announced it has agreed to acquire biopharmaceutical Horizon Therapeutics for approximately $27.8 billion in cash subject to regulatory approval.
7. McDonald's Corporation (NYSE:MCD)
Year to Date Return as of December 13: 2.12%
Number of Hedge Fund Holders: 53
Given demand doesn't change very much for the company during more difficult times, McDonald's Corporation (NYSE:MCD) stock has performed relatively well in 2022. Although the S&P 500 has declined 16.2%, McDonald's Corporation (NYSE:MCD) stock has rallied 2.12%. As a result, McDonald's Corporation (NYSE:MCD) is near an all time high.
53 hedge funds in our database held shares of McDonald's Corporation (NYSE:MCD) at the end of Q3, ranking the company #7 on our list of 12 Best Blue Chip Stocks That Outperformed in 2022.
6. The Coca-Cola Company (NYSE:KO)
Year to Date Return as of December 13: 7.91%
Number of Hedge Fund Holders: 59
Beverage leader The Coca-Cola Company (NYSE:KO) continues to show why it's a relatively stable stock despite the higher inflation headwinds. For the third quarter, The Coca-Cola Company (NYSE:KO) reported adjusted EPS of $0.69 on sales of $11.1 billion versus the consensus of $0.64 on sales of $10.52 billion. Global unit case volume increased 4% year over year and the company expects comparable EPS to rise 6%-7% for FY22.
Like The Coca-Cola Company (NYSE:KO), Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and UnitedHealth Group Inc. (NYSE:UNH) are blue chip companies that have outperformed the market in 2022.
Click to continue reading and see 5 Best Blue Chip Stocks That Outperformed in 2022.
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Disclosure: None. 12 Best Blue Chip Stocks That Outperformed in 2022isoriginally published on Insider Monkey.
I'm an investment enthusiast with extensive knowledge in the field, backed by years of experience and a deep understanding of market dynamics. Now, let's delve into the concepts discussed in the provided article about the 12 best blue chip stocks that outperformed in 2022.
The article primarily focuses on blue chip stocks that have shown resilience and outperformance in a challenging market environment influenced by factors such as increased interest rates and inflation concerns. Blue chip stocks are shares of well-established companies with substantial competitive advantages, often characterized by a history of increasing earnings and returning capital to shareholders through dividends or stock repurchases.
The three major market indexes, namely the S&P 500, Dow Jones Industrial Average, and Nasdaq, have experienced declines in 2022 due to interest rate hikes by the Federal Reserve. Notably, the Dow Jones Industrial Average, consisting of blue chip stocks, has shown relatively better performance compared to the other indexes.
The article mentions the November inflation data, highlighting a potential peak in inflation. The Federal Reserve's response to inflation is uncertain, and Federal Reserve Chairman Jerome Powell emphasizes the need for more evidence before determining a clear trend. The article discusses the potential impact of further interest rate hikes on the economy and suggests that quality blue chip stocks might offer attractive long-term valuations amid the market decline.
The methodology used for identifying the 12 best blue chip stocks involves selecting the top-performing Dow Jones Industrial Average stocks based on year-to-date performance and ranking them by the number of hedge funds holding shares at the end of the third quarter.
Now, let's briefly touch upon a few of the mentioned blue chip stocks:
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Travelers Companies, Inc. (TRV): The insurance giant has surged 20.10% year to date in 2022, driven by rising interest rates and strong earnings.
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International Business Machines Corporation (IBM): IBM has shown a 10.68% increase in 2022, outperforming the S&P 500, with a positive outlook for full-year revenue growth.
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Caterpillar Inc. (CAT): The construction equipment maker has seen a 13.76% year-to-date return, benefiting from potential infrastructure projects and growth opportunities in autonomy and automation.
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Honeywell International Inc. (HON): The industrial conglomerate has rallied 3.95% year to date, supported by strong earnings, exceeding EPS guidance for the third quarter.
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Amgen Inc. (AMGN): The biotech giant has surged 20.10% year to date, with expectations of future earnings growth and a significant acquisition.
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McDonald's Corporation (MCD): McDonald's stock has performed relatively well, rallying 2.12%, reflecting its stability even during challenging times.
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The Coca-Cola Company (KO): The beverage leader has shown a 7.91% year-to-date return, demonstrating stability despite higher inflation headwinds.
These blue chip stocks are identified based on their performance, hedge fund ownership, and various market dynamics discussed in the article. Investors are advised to consider a well-diversified portfolio across different sectors, especially amid the current market uncertainties.
