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 a financial analyst and enthusiast with a deep understanding of the stock market and investment strategies. I've closely followed market trends, economic indicators, and individual stock performances, making me well-versed in the dynamics of the financial world.
Now, let's delve into the concepts mentioned in the article about the "12 Best Blue Chip Stocks That Outperformed in 2022."
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Blue Chip Stocks: Blue chip stocks are shares of well-established, financially stable, and reputable companies with substantial competitive advantages. These companies often have a history of consistent earnings growth and return value to shareholders through dividends or stock repurchases. In the context of the article, the Dow Jones Industrial Average is highlighted as a key index comprising blue chip stocks.
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Market Performance in 2022: The article discusses the challenging year for markets in 2022, marked by increased interest rates by the Federal Reserve to combat inflation. This has led to a decline in major market indexes, including the S&P 500, Dow Jones Industrial Average, and Nasdaq.
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Inflation and Federal Reserve's Response: The narrative touches on inflation data for November, indicating a year-over-year increase in the consumer price index. The Federal Reserve, led by Chairman Jerome Powell, is monitoring the situation and considering potential responses, such as raising interest rates. Powell emphasizes the need for substantial evidence before concluding that inflation is declining.
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Stock Selection Methodology: The article outlines the methodology used to select the "12 Best Blue Chip Stocks That Outperformed in 2022." It involves taking the best-performing Dow Jones Industrial Average stocks and ranking them based on the number of hedge funds holding shares at the end of the third quarter.
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Highlighted Blue Chip Stocks: Several blue chip stocks are mentioned along with their year-to-date returns and the number of hedge fund holders:
- Travelers Companies, Inc. (TRV)
- International Business Machines Corporation (IBM)
- Caterpillar Inc. (CAT)
- Honeywell International Inc. (HON)
- Amgen Inc. (AMGN)
- McDonald's Corporation (MCD)
- The Coca-Cola Company (KO)
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Earnings and Performance Indicators: The article provides insights into the financial performance of these companies, including earnings per share, sales figures, and expectations for future growth. It highlights factors such as rising interest rates, strong earnings, and potential growth opportunities in specific sectors.
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Market Outlook and Diversification: Given the uncertainties in the market, the article suggests that long-term investors may benefit from owning a well-diversified portfolio of stocks across various sectors. It also acknowledges the potential attractiveness of quality blue chip stocks with favorable valuations in the long term.
In conclusion, the article offers a comprehensive overview of the market conditions, the performance of blue chip stocks, and factors influencing investment decisions in 2022.
