3 High-Quality Blue-Chip Stocks for a Volatile Market

Blue chip stocks are ideal for a volatile market because they offer lower risk, reliable returns, and stability due to their well-established business models and strong cash flows. Their consistent dividends and lower volatility make them a safe investment, providing dependable growth even during market uncertainty.

Given this backdrop, investors might consider buying high-quality blue-chip stocks Visa Inc. (V), Salesforce, Inc. (CRM), and Caterpillar Inc. (CAT) for stable returns.

The stock market is facing volatility as September begins with notable sell-offs. Concerns over high valuations, economic data, and AI-related tech stocks are creating uncertainty. Blue-chip stocks, offering consistent growth, reliable dividends, and steady earnings, provide stability amidst the turbulence. Therefore, blue-chip stocks remain prudent for investors prioritizing security and performance.

Inflation is nearing the Fed's 2% target, signaling improved price stability, and the Fed plans to lower interest rates to stimulate economic activity. However, the economy shows signs of a potential slowdown, raising concerns about job growth and overall stability. Recent soft job reports add complexity to the economic outlook, even with anticipated rate cuts.

Hence, the overall economic outlook remains mixed, positioning blue-chip stocks as a reliable investment option that offers stability and growth in uncertain times. With these favorable trends in mind, let’s analyze the fundamental aspects of the three blue-chip picks.

Visa Inc. (V)

V is an international payment technology company that operates VisaNet, a transaction processing network that enables the authorization, clearing, and settlement of payment transactions. It offers Visa Direct, Visa B2B Connect, Visa Cross-Border Solution, Visa DPS (Data Processing Services), and credit, debit, and prepaid card products.

On July 9, 2024, V partnered with HSBC to launch the Zing international payments app, enabling users to hold, send, and transact in multiple currencies globally. The collaboration leverages V’s technology for seamless currency exchange and financial management.

In terms of the trailing-12-month net income margin, V’s 54.72% is 144.3% higher than the 23.39% industry average. Its 20.99% trailing-12-month Return on Total Assets is considerably higher than the 1.05% industry average. Likewise, its 49.85% trailing-12-month Return on Common Equity is 385.8% higher than the industry average of 10.26%.

During the fiscal third quarter that ended on June 30, 2024, V’s net revenue increased 9.9% year-over-year to $8.90 billion. The company’s operating income rose marginally from the year-ago value to $5.94 billion. In addition, its non-GAAP net income and non-GAAP EPS were $4.91 billion and $2.42, up 9.1% and 12% year-over-year, respectively.

For the quarter ending September 30, 2024, V’s revenue is expected to increase 10.1% year-over-year to $9.48 billion. Its EPS for the same quarter is expected to increase 10.6% year-over-year to $2.58. It surpassed consensus EPS estimates in each of the trailing four quarters. V’s stock has gained 15.4% over the past year to close the last trading session at $285.34.

V's POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Momentum, Stability, and Quality. It is ranked #12 out of 47 stocks in the Consumer Financial Services industry. Beyond what we stated above, we have also rated V for Growth, Value, and Sentiment. Get all ratings of V here.

Salesforce, Inc. (CRM)

CRM provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. The company's service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and relationship intelligence, and deliver quotes, contracts, and invoices.

On September 5, 2024, CRM announced it would acquire Own Company for $1.9 billion to enhance its data protection and management capabilities. The acquisition aims to strengthen CRM’s platform security and compliance while expanding AI-driven data insights.

On July 24, 2024, CRM and Workday announced a strategic partnership to launch an AI-powered employee service agent. This agent will streamline tasks like onboarding and career development by integrating CRM technology and Workday HR and financial data.

In terms of the trailing-12-month EBITDA margin, CRM’s 25.63% is 157.9% higher than the 9.94% industry average. Likewise, its 76.35% trailing-12-month gross profit margin is 54.5% higher than the 49.43% industry average. Its 19.06% trailing-12-month EBIT margin is 284.9% higher than the 4.95% industry average.

CRM’s total revenues for the fiscal second quarter that ended on July 31, 2024, rose 8.4% year-over-year to $9.33 billion. Its non-GAAP income from operations rose 15.5% from the year-ago value to $3.14 billion. Similarly, the company’s non-GAAP net income and non-GAAP net income per share came in at $2.50 billion and $2.56 per share, up 19.1% and 20.8% over the prior-year quarter, respectively.

Street expects CRM’s EPS and revenue for the quarter ending October 31, 2024, to increase 16% and 7.2% year-over-year to $2.45 and $9.35 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 9.5% to close the last trading session at $246.16.

It’s no surprise that CRM has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.

It has a B grade for Sentiment and Quality. Within the Software - Application industry, it is ranked #15 out of 125 stocks. To access additional grades for CRM’s Growth, Value, Momentum, and Stability ratings, click here.

Caterpillar Inc. (CAT)

CAT manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through Construction Industries, Resource Industries, Energy & Transportation, Financial Products, and All Other Operating segments.

On August 13, 2024, CAT announced a major expansion at its Lafayette, Indiana large engine facility, adding 100 new jobs. This investment aims to increase capacity for new engines and aftermarket parts to meet growing global demand, driven by cloud computing and AI.

In terms of the trailing-12-month EBIT margin, CAT’s 21.29% is 112% higher than the 10.04% industry average. Its 4.66% Capex / Sales is 59.1% higher than the 2.93% industry average. Also, its 11.12% trailing-12-month levered FCF margin is 72.2% higher than the 6.46% industry average.

CAT’s total sales and revenue for the second quarter ended June 30, 2024, amounted to $16.69 billion. Its revenue from financial products stood at $849 million, up 9.8% over the prior-year quarter. Moreover, the company’s adjusted profit and adjusted profit per share increased 2.6% and 7.9% year-over-year to $2.93 billion and $5.99, respectively.

Analysts expect CAT’s revenue for the quarter ending March 31, 2025, to increase marginally year-over-year to $15.81 billion. Its EPS for fiscal 2024 is expected to grow 4.1% year-over-year to $22.08. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, CAT’s stock has gained 28.8% to close the last trading session at $334.16.

CAT’s POWR Ratings reflect strong prospects. It has a B grade for Stability and Quality. It is ranked #42 out of 78 stocks in the A-rated  Industrial - Machinery industry. To see CAT’s Growth, Value, Momentum, and Sentiment ratings, click here.

What To Do Next?

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V shares were trading at $281.54 per share on Wednesday afternoon, down $3.80 (-1.33%). Year-to-date, V has gained 8.76%, versus a 16.59% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

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