Blue chips with rock-solid financials have been among the most secure holdings of the COVID pandemic. They should be just fine on the way out, too.
We said around this time last year that blue chips with
unimpeachable financials would be the kind of stocks that could come out of the
pandemic smelling the most like roses.
That indeed came to pass, but now that the economy is on
recovery road, don't think it's time to abandon these kinds of sturdy blue-chip
stocks. After all, brawny balance sheets and responsible fiscal management
never really go out of style.
We enlisted the help of Value Line to explore a universe of
blue chips that earned their A++ rating for financial strength. But naturally,
investors don't want to invest in companies that are expected to tread water,
so the selections also had to have projected three- to five-year annual growth
of at least 5%.
Ian Gendler, Value Line director of research, said that an
A++ rating requires an exceptional balance sheet with moderate debt levels and
a strong cash position. He added that, to achieve growth, these companies also
had to demonstrate successful operations, wide margins and significant cash
flows.
But he maintains the primacy of balance sheets in assessing
financial strength.
"Growth can drive earnings and share price," he
says. "But when growth dries up, or the economy makes it challenging to
find, a strong balance sheet is what ensures the company will live to fight
another day."
Here, we explore 25 blue chips with brawny balance sheets.
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