7 of the Best Blue-Chip Stocks to Buy for 2018 (2024)

Blue-chip stocks: quality over quantity.

Stocks remain the best asset class to invest in for long-term returns, but not every investor can bear the anxiety that comes with bear markets like the 2008-2009 financial crisis -- or even the sudden correction seen in the first quarter, for that matter. The best blue-chip stocks to buy for 2018 can anchor your portfolio and give you some peace of mind. After a nine-year rally, investors can protect their downside potential by buying large, diversified, quality businesses with long track records of excellence, world-renowned brands, and a willingness to pay dividends. Here are seven of the best blue-chip stocks to buy for 2018.

Updated on April 26, 2018: This story was originally published on Dec. 15, 2017, and has been updated with new information.

Apple Inc. (Nasdaq: AAPL)

Apple is a must-own in most diversified portfolios and is extremely well-positioned to be the world's first $1 trillion company. What's more, it's become obsessed with returning cash to shareholders through share buybacks and dividends and trades at under 14 times forward earnings. The iPhone X, the first smartphone Apple's had the gumption to charge $1,000 for, debuted in December, and with demand bleeding over, analysts expect Apple's earnings to be quite impressive. There are only a few no-brainers in the stock market, and at the moment, AAPL is one of them -- which is doubly true after the passage of tax reform.

Goldman Sachs Group Inc (GS)

There are 715 companies worth more than $10 billion, but only 78 of them have the following qualities: a price-earnings ratio under 20, a forward P/E below 15, positive trailing five-year sales growth, revenue growth last quarter and EPS growth expected to exceed 10 percent for the next five years. These high-quality stocks are all reasonably valued, well-managed and still growing -- and Goldman is among them. With rising rates and an opportunity to eventually underwrite some of Saudi Aramco's anticipated record-setting $100 billion initial public offering, GS earned its spot among the best blue-chip stocks to buy for 2018. Bank stocks as a whole also look poised to outperform this year.

Walgreens Boots Alliance Inc (WBA)

The best time to buy a stock is when a good company gets unfairly sold by Wall Street, which is what happened to WBA in 2017 as rival CVS (CVS) agreed to acquire Aetna (AET). Mr. Market curiously dismissed Walgreen's savvy acquisition of 1,932 Rite-Aid (RAD) locations, which strengthened its position in the drugstore oligopoly. Recently, WBA also bought a 40 percent stake in China's biggest retail pharmacy chain for just $418 million. With shares paying a 2.4 percent dividend and a string of recent insider purchases, unnecessarily pessimistic sentiment helps make WBA one of the best blue-chip stocks to buy for 2018.

Visa Inc (V)

Visa embodies the ethos of the blue-chip stock. It's one of the 15 most valuable public companies, enjoys huge market share in a consolidated yet growing industry, is highly profitable and enjoys high barriers to entry. Visa is the global market share leader in credit cards and, in the U.S., has 323 million active accounts to MasterCard's (MA) 191 million. It's tough to go wrong with a company whose margins increase every time people swipe a little more plastic. Plus, while its 0.7 percent dividend might not be much, it's been growing for nine years; Visa, with huge amounts of offshore cash, is also a major beneficiary of tax reform.

Medtronic PLC Ordinary Shares (MDT)

While Medtronic likely won't be posting wild growth numbers anytime soon, the sprawling $110 billion medical technology company is still one of the best blue-chip stocks to buy for 2018. That's because MDT prizes the long term over the short term, as illustrated by its $6.1 billion 2017 sale of several business lines to Cardinal Health (CAH). The deal will decrease fiscal 2018 EPS but boost long-term revenue growth and margins, and eventually EPS will benefit as well. With MDT using the proceeds to buy back stock and pay down debt as rates rise, investors can also consider this 2.3 percent dividend payer a low-volatility portfolio hedge should recession hit.

Texas Instruments Inc (TXN)

Founded in 1930, TXN is worth $100 billion today. The company is still growing at a healthy clip, with revenue growing 11.9 percent and net income rising 20 percent in fiscal 2017. Not only is TXN a leading supplier to the rapidly transforming automotive and industrial sectors, it also boasts a great track record of dividend growth; TXN has raised its dividend for 14 consecutive years, at a compound annual growth rate of 27 percent. It's also intent on reducing the share count through buybacks, trimming its share count from 1.77 billion in 2004 to 1 billion in 2017. Few other stocks offer a 2.4 percent dividend and such attractive growth.

Pfizer Inc. (PFE)

Last and certainly not least of the best blue-chip stocks to buy for 2018: Pfizer. Founded in 1849, Pfizer is currently worth about $215 billion. PFE stock pays a hard-to-match, sustainable 3.7 percent dividend, which is roughly 50 percent more than rival Johnson & Johnson's (JNJ) 2.5 percent yield. While Pfizer doesn't currently look like much of a growth stock (few pharmas this size are), its pipeline is impressive: PFE is waiting for FDA approval on nine drugs and has 28 treatments in late-stage clinical trials. Importantly, the stock is also resilient to market pullbacks, making it unlikely to lose as much as the Standard & Poor's 500 index in a crash.

John Divine is an investing reporter for U.S. News & World Report, where he covers financial markets and the economy, with a focus on individual stock analysis. He has been an investor himself for over 10 years, and has been writing professionally about stocks and investing for the last five years. He previously wrote about the stock market for The Motley Fool and InvestorPlace, and his work has appeared on Yahoo! Finance, MSN Money, and AOL DailyFinance. He graduated from Appalachian State University in 2011 with a bachelor's degree in finance and banking. At Appalachian, he was a member of the Bowden Investment Group, a team of students that ran a real-money portfolio worth over $100,000. You can follow him on Twitter or give him the Tip of the Century at jdivine@usnews.com.

I'm John Divine, an investing reporter with over a decade of personal investment experience and five years of professional writing about stocks and investing. I've covered financial markets and the economy, focusing on individual stock analysis for outlets like U.S. News & World Report, The Motley Fool, and InvestorPlace. My work has been featured on Yahoo! Finance, MSN Money, and AOL DailyFinance. I graduated from Appalachian State University in 2011 with a bachelor's degree in finance and banking, during which time I was a member of the Bowden Investment Group, managing a real-money portfolio exceeding $100,000.

Now, let's delve into the concepts related to the article on blue-chip stocks: "Blue-chip stocks: quality over quantity."

The article emphasizes the significance of blue-chip stocks as a long-term investment for stable returns. Blue-chip stocks are characterized by being large, well-established companies with a history of financial stability, excellence, and often paying dividends. Here are the key concepts from the article and insights on the mentioned blue-chip stocks:

  1. Apple Inc. (AAPL):

    • Must-own in diversified portfolios.
    • Well-positioned to be the world's first $1 trillion company.
    • Emphasis on returning cash to shareholders through buybacks and dividends.
    • High expectations for impressive earnings, particularly with the iPhone X's success.
  2. Goldman Sachs Group Inc (GS):

    • Among the high-quality stocks with specific criteria: P/E ratio, sales growth, and EPS growth.
    • Poised to benefit from rising rates and potential involvement in Saudi Aramco's IPO.
  3. Walgreens Boots Alliance Inc (WBA):

    • Opportunistic time to buy due to market reaction to CVS-Aetna deal.
    • Acquisition of Rite-Aid locations strengthens its position.
    • Recent stake in China's largest retail pharmacy chain.
    • Dividend payment and insider purchases contribute to its appeal.
  4. Visa Inc (V):

    • Embodies the ethos of a blue-chip stock with a strong market position.
    • Global market share leader in credit cards.
    • Consistent dividend growth and a beneficiary of tax reform.
  5. Medtronic PLC Ordinary Shares (MDT):

    • Prioritizes long-term growth over short-term gains.
    • Strategic sale of business lines to boost long-term revenue growth.
    • Considered a low-volatility portfolio hedge with a 2.3 percent dividend.
  6. Texas Instruments Inc (TXN):

    • Founded in 1930, still growing with a focus on automotive and industrial sectors.
    • Consistent dividend growth and share count reduction through buybacks.
    • Offers a 2.4 percent dividend and attractive growth.
  7. Pfizer Inc. (PFE):

    • Established in 1849, currently worth about $215 billion.
    • Pays a sustainable 3.7 percent dividend, resilient to market pullbacks.
    • Impressive drug pipeline with FDA approvals pending.

The article's author, John Divine, provides a comprehensive overview of these blue-chip stocks, highlighting their strengths, potential for growth, and resilience in market fluctuations.

7 of the Best Blue-Chip Stocks to Buy for 2018 (2024)
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