These seven Blue Chip stocks have great stories, positive catalysts for future growth, are extremely oversold and have substantial profit margins. There may be more volatility in front of us even with the more than 10% drop in the Dow recently. Nevertheless this may be a good point to start a position in these highly profitable buying opportunities. As Warren Buffett says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
After the precipitous drop in the Dow in 2008, the high dividend payers were the first to recover. The top seven stocks in the Dow with the highest profit margins are Microsoft (NASDAQ:MSFT), The Coca-Cola Company (NYSE:KO), Intel Corporation (NASDAQ:INTC), McDonald’s Corporation (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), AT&T, Inc. (NYSE:T), and 3M Co. (NYSE:MMM).
These are bullish indicators regarding a stock's possible future performance. Robust profit and sales margins are traits of notable names. Moreover, most of these stocks are trading well below consensus analysts’ estimates. Several have recent upgrades and positive analyst comments. Nonetheless, this is only the first step in finding winners for a portfolio. Let's take a closer look to distinguish the driving factors behind these remarkable statistics and ensure the stories are intact.
Below is a table with detailed statistics regarding each company’s current fundamental information followed by a brief review of each company, detailed current analysts' estimates and up/downgrade activity followed by a chart of the company's key statistics. Please use this as a starting point for your own due diligence.
Click on image to enlarge
Microsoft develops, manufactures, licenses, and supports a range of software products and services for various computing devices worldwide. Microsoft was founded in 1975 and is headquartered in Redmond, Washington.
Microsoft Corp. and SUSE, an independent business unit of The Attachmate Group Inc., recently announced:
A four-year extension of the groundbreaking agreement struck nearly five years ago between Microsoft and Novell Inc. for broad collaboration on Windows and Linux interoperability and support. This relationship will extend through Jan. 1, 2016, with Microsoft committed to invest $100 million in new SUSE Linux Enterprise certificates for customers receiving Linux support from SUSE.
The company is trading below analysts' estimates. Microsoft has a median price target of $33 by 25 brokers and a high target of $37. The last up/downgrade activity was on Feb. 17, when Collins Stewart initiated coverage on the company with a Buy rating.
The Coca-Cola Company manufactures, distributes and markets non-alcoholic beverage concentrates and syrups worldwide.
The Coca-Cola Company recently announced:
The pricing of its offer to certain eligible holders to exchange specified series of outstanding debt securities issued by Coca-Cola Refreshments USA, Inc. (CCR), a wholly-owned subsidiary of the Company, for a combination of debt securities to be issued by the Company and cash, the complete terms of which are set forth in an Offering Memorandum, dated August 3, 2011, and the related Letter of Transmittal.
The company is trading below analysts' estimates. Coca-Cola has a median price target of $77 by 14 brokers and a high target of $80. The last up/downgrade activity was on March 4, 2010, when UBS (NYSE:UBS) upgraded the company from Neutral to Buy.
Intel Corporation engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Intel Corporation was founded in 1968 and is based in Santa Clara, California.
Intel Corporation's board of directors has recently declared a 21 cents per share (84 cents per share on an annual basis) quarterly dividend on the company's common stock, reflecting the previously announced 16 percent increase from May 11.
Intel Corporation recently reported:
Its fifth consecutive quarter of record revenue, with double-digit revenue growth across all business segments. On a Non-GAAP basis, revenue was $13.1 billion, operating income was $4.2 billion, net income was $3.2 billion, and EPS was 59 cents. On a GAAP basis, the company reported second-quarter revenue of $13.0 billion, operating income of $3.9 billion, net income of $3.0 billion, and EPS of 54 cents. The company generated approximately $4.0 billion in cash from operations, paid cash dividends of $961 million, and used $2.0 billion to repurchase 93 million shares of common stock.
The company is trading below analysts' estimates. INTC has a median price target of $26 by 39 brokers and a high target of $32. The last up/downgrade activity was on Aug 8, 2011, when Standpoint Research upgraded the company from Hold to Buy.
McDonald’s Corporation, together with its subsidiaries, operates as a worldwide food service retailer.
McDonald's Corporation recently announced:
Global comparable sales growth of 5.1% in July. Performance by segment was as follows:
U.S. up 4.4%
Europe up 5.3%
Asia/Pacific,Middle East and Africa up 4.0%
McDonald's Chief Executive Officer Jim Skinner said:
McDonald's continues to deliver great tasting, high quality food at an outstanding value to a growing number of customers around the world. We're creating a unique McDonald's experience that is welcoming our customers into modern restaurants with convenient hours and locations and offering more choice in food and drink options than ever before.
The company is trading below analysts' estimates. McDonald’s has a median price target of $99 by 19 brokers and a high target of $105. The last up/downgrade activity was on Jan. 18 when RBC Capital Markets (NYSE:RY) upgraded the company from Sector Perform to Outperform.
Johnson & Johnson engages in the research and development, manufacture, and sale of various products in the healthcare field worldwide.
Johnson & Johnson recently announced:
Sales of $16.6 billion for the second quarter of 2011, an increase of 8.3% as compared to the second quarter of 2010. Operational results increased 2.6% and the positive impact of currency was 5.7%. Domestic sales increased 0.1%, while international sales increased 15.9%, reflecting operational growth of 4.9% and a positive currency impact of 11.0%.
The company is trading below analysts' estimates. Johnson & Johnson has a median price target of $73 by 13 brokers and a high target of $80. The last up/downgrade activity was on Jun 17, 2011, when Morgan Keegan initiated coverage on the company with a Market Perform rating.
AT&T Inc., together with its subsidiaries, provides telecommunication services to consumers, businesses, and other service providers worldwide.
The launch of two new Telepresence rooms located at IHG’s corporate offices in Atlanta and London. IHG expects the deployment of these rooms to increase regional collaboration, increase employee productivity and in turn allow employees to make decisions faster and more efficiently.
The company is trading below analysts' estimates. AT&T has a median price target of $33 by 25 brokers and a high target of $36. The last up/downgrade activity was on Jun 24, 2011, when Kaufman Brothers initiated coverage on the company with a Hold rating.
3M Company, together with subsidiaries, operates as a diversified technology company worldwide.
The Board of Directors of 3M recently declared:
A dividend on the company's common stock of 55 cents per share for the third quarter of 2011, payable Sept. 12, 2011, to shareholders of record at the close of business on August 19, 2011. 3M has paid dividends to its shareholders without interruption for 95 years. As of June 30, 2011, 3M had 709,535,731 common shares outstanding and 102,341 shareholders of record.
3M recently reported:
Record second-quarter sales of $7.7 billion, up 14.1 percent year-on-year. Earnings rose 3.9 percent to $1.60 per share and operating margins were 21.6 percent. The company generated $1.2 billion in free cash flow during the quarter, equal to 100 percent of net income. Sales increased in all geographic regions, with Europe up 24.1 percent, Latin America/Canada up 20.2 percent, Asia Pacific up 11.0 percent and the U.S. up 8.7 percent. Five of the company’s six business segments expanded sales in the quarter, with particular strength in Industrial and Transportation at 24.6 percent and Safety, Security and Protection Services at 19.7 percent.
The company is trading significantly below analysts' estimates. 3M Company has a median price target of $105 by 17 brokers and a high target of $125. The last up/downgrade activity was on Apr 28, 2010, when Barclays Capital (NYSE:BCS) upgraded the company from Equal Weight to Overweight.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.