If this year’s market volatility has you feeling uneasy, you’re not alone. The overvaluation of many tech stocks has created a challenging environment, but plenty of affordable, undervalued blue-chip stocks can provide the stability your portfolio needs.
In the current market rally, stocks have surged, plummeted and surged again, leading investors to favor small-cap, tech and growth stocks. While this strategy has been profitable for some, it may not be the best long-term approach. In contrast, undervalued blue-chip stocks offer the stability many portfolios lack, with long-term upside augmenting their stability today.
The economic outlook remains uncertain, with inflation persistently above the Federal Reserve’s 2% target, complicating the recovery path. A single adverse event could cause speculative stocks to nosedive. To safeguard your portfolio, look to these undervalued blue-chip stocks that offer stability, value and diversification. They can help protect your portfolio from significant losses if (or when) the market experiences another downturn.
U-Haul (UHAL)
U-Haul (NYSE:UHAL) is a powerhouse in the DIY moving and truck rental industry, boasting a vast network of 23,000 locations that far surpasses its competitors. Despite its dominance, U-Haul remains relatively underappreciated by investors, including those looking for undervalued blue-chip stocks. This lack of attention extends to institutional investors as well. Barron’s highlights that “There is virtually no Wall Street coverage of U-Haul” and notes that it’s “run like a private company by the Shoen family, which owns about half the company.”
Trading at a modest 19x earnings and 1.6x book value, U-Haul is poised to benefit as the Federal Reserve maintains a softer monetary stance, even if interest rates remain steady. Recent trends show an increase in new housing starts, signaling the imminent arrival of the busy summer moving season as mortgage rates stabilize. This uptick in housing activity is advantageous for U-Haul, given that many movers prefer the cost-effective DIY moving option. Surveys indicate that only 22% of movers hire professional moving companies, while 37.5% choose to rent a truck and handle the move themselves.
Steel Dynamics (STLD)
Warren Buffett may shy away from commodity-based companies, deeming them too volatile for blue-chip status. However, Steel Dynamics (NASDAQ:STLD) presents a compelling case as an exception. It blends traditional manufacturing with a strong commitment to sustainability.
As the third-largest steel producer in the U.S., Steel Dynamics excels in scale and its innovative approach to sustainable manufacturing. The company emphasizes metals recycling, which boosts profitability by maintaining high-quality metals within global supply chains and aligns with broader environmental goals. With an impressive 8.3% total yield, Steel Dynamics appeals to value investors looking for solid returns. The company’s dedication to shareholder value is evident in its consistent dividend growth. It recently increased 8% to 46 cents per share, marking five consecutive years of increases and a steadfast commitment to quarterly payments.
In 2023, Steel Dynamics reported its second-highest revenue year. It made $18.8 billion in sales and a net income of $2.5 billion. The company repurchased 8% of its outstanding shares demonstrating further commitment to its shareholders. This was despite higher debt costs and the inherently expensive nature of steel production. For conservative investors, Steel Dynamics stands out among undervalued blue-chip stocks today.
Medtronic (MDT)
Medtronic (NYSE:MDT) is an excellent example of an undervalued blue-chip stock that combines stability with growth potential. Unlike the often complex and volatile pharma and biotech sectors, medical device companies like Medtronic are generally more accessible to retail investors. They frequently represent the healthcare sector in blue-chip portfolios. As a member of the dividend aristocrats, Medtronic is well-positioned to capitalize on future advancements in healthcare.
A key highlight of Medtronic’s forward-thinking strategy is its collaboration with Nvidia (NASDAQ:NVDA) to develop an AI-powered diagnostic platform. CEO Geoff Martha recently emphasized the company’s use of AI for diagnostics and clinical decision support, new treatment indications and personalized therapies. This positions Medtronic as a leader in integrating AI into medical technology.
Moreover, Medtronic is making inroads into drone delivery, as the company is leveraging drone delivery service Wing in Ireland to quickly bring medical supplies and devices to hospitals and clinics — yet again placing Medtronic at the leading edge of healthcare.
Medtronic’s current total yield is 5.45%, primarily driven by its reliable dividend — a characteristic feature of quality blue-chip stocks.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.