5 Best Blue Chip Stocks to Buy in December 2021

Blue chip companies have a strong position in their respective industries and often pay dividends. The economic environment for 2022 is looking far less rosy than 2021.

While global economic growth is expected to come down, we could see rate hikes across the world, including the US where the dot plot called for three rate hikes next year. Blue chip stocks can give stability to your portfolio even as they might not be multi-baggers in the short term. Here are five such stocks that you can buy for 2022.

1. Apple (NYSE: AAPL)

Apple is the largest company on the planet with a market cap of almost $3 trillion. It is the second-best performing FAANG stock of 2021 and should continue its good run in 2022 also. Citi is bullish on the stock and highlighted five reasons why they believe the stock can outperform. Firstly, the brokerage is bullish on the upcoming AR/VR sets which it expects would cost between $750-$1,000 each.

Citi also expects more fund flows into Apple stock as investors seek the safety of strong companies. Citi analyst Jim Siva expects Apple to announce another major buyback in 2022 and also increase its dividend by 10%. He also expects Apple’s topline growth to support the stock price. Finally, Siva believes that news flow over Apple’s rumored electric car would keep the stock buoyant. While not much is known about the company’s electric car project, it is widely believed that it would go for third-party tie-ups. Even the most hardcore Tesla stock bulls like Adam Jonas and Gene Munster believe that Apple’s entry into electric cars would be the biggest risk for Tesla.

Apple is the biggest blue chip company

Apple is the biggest blue chip company and the rumored entry into electric cars could drive the company’s long-term growth. It is the largest holding for Berkshire Hathaway and Warren Buffett has admired the company and its products on multiple occasions. Overall, if you are looking to buy a blue chip stock for 2022, Apple stock should definitely be on your radar.

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2. Nike (NYSE: NKE)

Nike stock has been facing supply-side issues amid the global logistics issues. However, it looks like a top blue chip stock to buy for 2022 looking at its strong brand and decent growth outlook. The company has been pivoting towards e-commerce operations which would help it improve the margins in the medium to long term. Along with the recovery in North America, NKE would also benefit from growing sales in emerging markets like China.

Nike is also focusing on metaverse and has launched the 3D immersive world of NIKELAND on online gaming platform Roblox. It also acquired virtual sneaker company RTFKT in the quarter. It also pays a dividend but the yield is even below that of the S&P 500’s paltry yield.

Nike is a good blue chip stock for 2022

Nike looks like a good blue chip stock for 2022 given the current macroeconomic environment. Wall Street analysts have also been bullish on the stock. Recently, Argus reiterated its buy rating on the stock and raised the target price to $168. The brokerage is particularly bullish on its Jordan brand which accounts for around 12% of its sales.

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3. Micron (NYSE: MU)

Micron is another blue chip stock that looks like a good buy in December 2021. The stock’s 2021 returns are in line with the S&P 500 but Bank of America believes that it is a good stock to buy for 2022. Bank of America analyst Vivek Arya recently upgraded the stock from neutral to buy and said that he expects the company’s performance to improve in 2022.

Bank of America finds MU a good blue chip stock to buy

“Overall we view MU as a compellingly growth-at a reasonable price (GARP) beneficiary of secular data center, 5G, metaverse, auto trends and a catch-up candidate after underperforming the SOX Index meaningfully in CY21,” said Arya while assigning a target price of $100 on Micron.

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4. Bank of America (NYSE: BAC)

Bank of America is the second-largest bank in the US. It looks like a good blue chip bank stock to buy for 2022 looking at the expected increase in interest rates. Banks generally borrow at the short end of the curve and lend at the long end. In a rising rate environment, banks make a higher margin as compared to a low interest rate environment. If the economic momentum sustains in 2022, bank stocks might continue to outperform.

JPMorgan listed BAC as a top blue chip bank stock for 2022

JPMorgan believes that BAC is the top bank stock to buy for 2022. Buffett is also bullish on the company and Bank of America is Berkshire Hathaway’s second-largest holding after Apple. If you are looking to buy a blue chip bank stock with a strong balance sheet and good dividend yield, BAC would fit the bill. The stock’s valuations also look attractive at these price levels.

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5. FedEx (NYSE: FDX)

FedEx stock is underperforming in 2021 as headwinds like labor shortage, rising wage costs, and supply chain issues took a toll on its earnings. The company reported its fiscal second-quarter 2022 earnings earlier this month which were better than expected. FedEx now expects adjusted earnings between $20.50-$21.50 in the full fiscal year which is higher than the previous guidance of $19.75-$21. The company also announced a $5 billion share repurchase program of which $1.5 billion is accelerated share purchase plan, which it intends to complete before its current fiscal year ends.

JPMorgan is bullish on FedEx stock

JPMorgan finds FedEx a good blue chip stock to buy and expects it to bounce back in 2022. It believes that the company has addressed the labor shortage issue. It raised the stock’s target price to $312. It pointed to the glaring valuation gap between FedEx and rival UPS.

FedEx stock trades at an NTM (next-12 months) PE multiple of 11.4x and has a dividend yield of 1.17%. FedEx is a long-term play on the growing market for e-commerce parcels. The strategic investments made by the company would help it in attracting e-commerce business.

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