Many experts believe the COVID-19 pandemic will fizzle out by the second half of 2021. But between now and then, however, global industrial and commercial operations will recover slowly. So, to bottom-line it, the economy is in a recovery mode but not completely out of the woods. There is still an element of uncertainty surrounding the recovery given high unemployment levels, weak consumer spending, and a slow manufacturing sector. According to Jim Cramer, host of CNBC’s popular show “Mad Money,” the stock market is on “a highway to the danger zone.” He suggests investors to exercise much caution. In these circumstances, we believe that blue chip stocks are the best picks.
Blue chip stocks are inherently safer investment options given their solid long-term return potential, which often protects them during short-term market fluctuations. With robust financials and sound business models, we think these companies are a must-have in the portfolios of long-term investors.
Walmart Inc. (WMT), Verizon Communications Inc. (VZ), McDonald’s Corporation (MCD), and 3M Company (MMM) are four such stocks that have demonstrated resilience during downturns because of their fundamental strength. These companies have performed steadily in 2020 and are well-placed to maintain their momentum this year and beyond irrespective of economic and market conditions.
Walmart Inc. (WMT)
WMT is a global retailing giant in terms of revenue. Walmart U.S., Walmart International, and Sam’s Club are the company’s three core segments. The company operates in various businesses that include hypermarkets, supermarkets, cash and carry stores, warehouse clubs and discount stores. The company has nearly 11,500 stores and several e-commerce websites under 56 banners across 27 countries.
WMT is now laying plans to build dozens of 20,000 square-foot to 30,000 square-foot automated warehouses in its stores to accelerate customers’ online delivery. At these centers, robots, rather than employees, will gather thousands of pantry items and frozen foods.
During the third quarter, ended September 30, 2020, WMT’s total revenue climbed 5.2% year-over-year to $134.7 million. Walmart U.S. comp sales rose 6.4%, led by strength across general merchandise, health & wellness and food. Meanwhile, its U.S. eCommerce sales surged 79% on a rise in online shopping during the pandemic. Its EPS for the quarter increased to $1.34 from $1.16 posted in the same period last year.
Analysts expect WMT’s revenue for the quarter ending January 31, 2021 to be $148.1 billion, representing a 4.5% increase year-over-year. Its EPS for the quarter is likely to increase 8.7% to $1.50.
WMT ended yesterday’s trading session at $144.06, rising 25.1% over the past year. Over the past six months WMT has gained 9.3%.
WMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
WMT also has an A grade for Stability and B grade for Quality, Value, and Sentiment. It is ranked #2 of 41 stocks in the A-rated Grocery/Big Box Retailers industry.
In total, we rate WMT on eight different levels. Beyond what we stated above, we have also given WMT grades for Momentum and Growth. Get all the WMT ratings here.
Verizon Communications Inc. (VZ)
VZ offers communications, information, and entertainment products and services to verticals that include consumers, businesses, and governmental entities worldwide. Its consumer segment delivers postpaid and prepaid service plans as well as internet services. VZ’s business segment offers network connectivity products, as well as private networking, private cloud connectivity, and virtual and software defined networking.
During the third quarter, ended September 30, 2020, VZ’s total operating revenue declined 4.1% year-over-year to $31.5 billion. Its EPS for the quarter also declined 4.1% over the year to $1.25. The company recorded 136,000 retail postpaid net additions during the quarter. Its total retail postpaid churn rate during the quarter was 0.80%.
Verizon Business and Deloitte recently unveiled a 5G and mobile edge computing (MEC) digital platform for the retail industry. The platform will offer near real-time analytics to improve customer engagement, inventory efficiency, and employee productivity for retailers.
A consensus revenue estimate for the quarter ending March 31, 2021 is $32.4 billion, representing a 2.6% increase year-over-year. Meanwhile, VZ’s EPS is likely to grow 1.6% to $1.28.
Over the past year, VZ retreated by 8.8% to end yesterday’s trading session at $54.62. Over the past six months, the stock declined 6.8%.
However, VZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. VZ has a grade of B for both Stability and Quality. It is ranked #2 of 25 in the Telecom-Domestic industry.
Click here to see the additional POWR Ratings for VZ (Growth, Value, Sentiment, and Momentum).
McDonald’s Corporation (MCD)
MCD operates restaurants that offer various food products and beverages, as well as a breakfast menu. The company operates McDonald’s restaurant franchises in the United States and internationally. MCD has more than 40,000 restaurants operating worldwide.
During the fourth quarter ended December 31, 2020, MCD’s revenue fell 2% year-over-year to $5.3 billion. Its EPS for the quarter declined to $1.84 from $2.08 posted in the prior year period. Its global comparable sales declined 1.3%. CEO and President, Chris Kempczinski, stated recently, “Accelerating the Arches strategy in drive-thru, delivery, and our growing digital presence, we’re confident we can continue to capture market share and drive long-term sustainable growth for all stakeholders.”
McDonald’s will likely bring back its Hi-C Orange beverage back to its menu. The fast-food giant had replaced Hi-C with Sprite Tropic Berry. However, customers aren’t happy with the change and are demanding the return of a non-carbonated beverage option. Hi-C will be served across all MCD outlets in the United States beginning in June 2021.
Analysts expect MCD’s revenue for the quarter ending March 2021 to be $5 billion, representing 6.6% year-over-year growth. Its EPS is likely to grow at the rate of 15.5% per annum over the next five years.
MCD has risen 0.6% during the past year to close yesterday’s session at $214.31. Over the past six months, the stock has gained 5%.
MCD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. MCD has an A grade for Quality. Among the 47 stocks in the Restaurants industry, it is ranked #9.
In addition to the POWR Ratings grades I’ve just highlighted, you can see MCD’s ratings for Growth, Value, Stability, Sentiment, and Momentum, here.
3M Company (MMM)
Through its Safety and Industrial, Transportation and Electronics, Health Care and Consumer segments, MMM develops, manufactures, and markets various industrial products. Industrial adhesives and tapes, display materials and systems, electronic materials solutions, medical and surgical supplies, and home improvement and office supplies are just some of the products manufactured by MMM.
MMM is considering the use of hemp in industrial adhesives. It is also considering growing and marketing human tissues and organs. Don Davidson, 3M’s Global New Product Marketing Manager, stated that because customers are seeking eco-friendly offerings, hemp has much potential. Currently, MMM is conducting extensive research in surgical gauze, garbage bags, sealing tapes, as well as non-woven material for agriculture.
During the fourth quarter, MMM’s revenue climbed 5.8% year-over-year to $8.6 billion, driven by its Safety and Industrial segment. Its EPS for the quarter climbed to $2.38 versus $1.66 posted in the same period last year. In 2020, MMM distributed two billion respirators globally. The company’s CEO and Chairman Mike Roman, said “We do expect demand in our N95 respirator masks to be strong as we go through the year,”
Analysts expect revenue for the quarter ending March 31, 2021 to be $8.5 billion, representing 5.2% year-over-year growth. Its EPS is likely to grow at the rate of 7% per annum over the next five years.
MMM has appreciated 13.1% over the past year to close yesterday’s session at $177.27. Over the past six months, the stock gained 12.2%.
MMM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. MMM has an A grade for Quality and B grade for Stability. Among 89 stocks in the A-rated Industrial – Machinery industry, it is ranked #36.
In addition to the POWR Ratings grades I’ve just highlighted, you can see MMM’s ratings for Growth, Value, Momentum, and Sentiment here.
The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
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WMT shares were trading at $144.39 per share on Friday morning, up $0.37 (+0.26%). Year-to-date, WMT has gained 0.17%, versus a 4.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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