This is the news everyone has been waiting for. However, the strength of the March 2021 employment report caught even some optimists by surprise. US hiring has skyrocketed as employers added 916,000 jobs in March, the best increase since August last year. However, despite the enthusiasm, investors should keep looking for blue-chip stocks to buy.
While this seems terribly pessimistic given the latest news, the economic recovery is far from over. First, how Wall street journal noted that we still have 8.4 million fewer jobs than in February 2020 – right before the new coronavirus pandemic completely disrupted our paradigm. So until we really get back on track, we probably shouldn’t open champagne and ignore safe blue-chip stocks.
Second, the recovery narrative naturally reinforces the inflation argument, which can lead politicians and central bankers to take an aggressive stance on fiscal and monetary policy. In my opinion, this may be the wrong course of action. Key data such as the velocity of money or the velocity of each currency in the economy indicate that we have systemic deflation, not inflation.
Third, the latest news shows how unpredictable life can be. Therefore, while you might want to take some risk, it is important to at least consider these blue chips for a more stable presence in the markets.
Nonetheless, these seven look like good candidates.
- China Southern Airlines (NYSE:ZNH)
- Alibaba (NYSE:WOMAN)
- Olin Corporation (NYSE:OLN)
- Beckton Dickinson (NYSE:BDX)
- Sony (NYSE:SONY)
- Microsoft (NASDAQ:MSFT)
- Mastercard (NYSE:MA)
However, before we begin to delve deeper, it is important to be vigilant. If you are interested in blue-chip stocks or want to gamble speculatively, let rational thinking be your guide, not emotional impulses.
China Southern Airlines (ZNH)
Among the blue chips, China Southern Airlines is one that I plug my nose in when I write these words. Before the novel coronavirus pandemic, ZNH shares made sense. According to OurWorldinData.org, tourism from Asia has become a force to be reckoned with, second only to tourism from Europe. The east tailwind is especially dependent on Chinese tourists.
Then the coronavirus hit, and the mood is no longer so rosy. Given the horrific social injustice that has taken place in the US, it’s hard to imagine Chinese tourists having great feelings when visiting. Instead, I believe there will be an increase in travel within China as well as regional travel in Asia.
We may already be seeing evidence of this. In 2020, China Southern Airlines reported revenues of $ 14.15 billion, down 36%. This is a huge fall. However, compare this with United Airlines (NASDAQ:UAL), Delta (NYSE:DAL) and Spirit Airlines (NYSE:TO RESCUE), which in 2020 decreased by 68.7%, 65% and 52.7%, respectively.
In other words, there is a strong case for ZNH stocks to rebound faster than other airline blue-chip stocks.
As for blue-chip stocks targeting the broader retail sector, I don’t think you can be wrong if Amazon (NASDAQ:AMZN). However, if you’re looking for more growth potential, I prefer Alibaba. Personally, I wouldn’t. As China’s flagship, the current geopolitical tensions make BABA shares an awkward investment, to put it diplomatically.
But the numbers don’t lie – it might have been a bad analogy, but you know what I mean! For the quarter ended December 31, 2020, Alibaba earned $ 33.8 billion, almost 37% more than a year earlier. Following the results of 12 months, the company added $ 98.04 billion. To put this in context, even in the first three quarters of fiscal 2021, the company will outperform 2020 by almost 8%.
Again, BABA stock probably won’t win popularity competition in some circles, but it’s a type of dominance you can’t ignore. This is, of course, the result of China’s crackdown on the new coronavirus, so much so that when Reuters mentions an increase in the number of cases, we are talking about two-digit numbers, not five or six.
Olin Corporation (OLN)
Over the past few months, I have been cautious about the US economy. Of course, with the latest job posting that far exceeded expectations, I look overly thoughtful. I will accept this criticism because I still have recovery questions. If we compare the employment rate in March 2021 with February 2020 (just before the crisis), we still fall by 5%.
However, if the economy continues to exceed expectations, it can be assumed that Olin Corporation, a leading chemical company, will exceed expectations. This is because Olin’s services are vital to the supply chain in a variety of industries. If we recover, OLN stock will be in a better position. Indeed, this is exactly what many investors expect given the stock returns.
But even if we are in total chaos, OLN stock should perform surprisingly well. As you probably know, the main company owns the Winchester ammunition brand. This is very important because gun makers love Smith & Wesson (NASDAQ:SWBI) enjoyed strong demand in the third quarter thanks to a number of new arms buyers.
So yes, this is one of the most cynically driven blue-chip stocks out there, but this is the reality we live in.
Beckton Dickinson (BDX)
Becton Dickinson is one of the leading medical device companies and will always be worthy to include in her blue chip portfolio. Of course, the time has passed for making huge profits on BDX stock. It’s not about getting rich. Instead, Becton Dickinson keeps you on the narrow and straight path while generating marginal but reliable dividend yields.
However, the company has previously received a surge in interest as the shortage of syringes has become another bottleneck for the coronavirus vaccine rollout. Don’t get me wrong – overall, our vaccination program has produced encouraging results. But many analysts have not forgotten that things could have been better. Nevertheless, Becton Dickinson remains one of the beneficiaries – increasing production to meet demand.
Also, I see BDX stock going up gradually because I am somewhat skeptical that the coronavirus crisis is coming to an end. With the latest data from the Centers for Disease Control and Prevention (CDC), the number of new cases is already slightly above this year’s low.
Hope it doesn’t mean anything. But if we do have a rebirth, BDX will be one of the blue chips to keep in mind.
On the more pleasant news, Sony is one of my favorite blue-chip stocks for three reasons. First, I worked there and, thanks to the consumer electronics giant, acquired the skills and discipline needed to write compelling content on a large scale. Secondly, SONY stocks are incredibly relevant due to their connection to the fast-growing video game market. Third, and most importantly, I own the stock.
Ok, maybe this is not the most important thing (but it is important me). Among the blue chip stocks that can be trusted until the end of this year, I trust SONY stock the most. As you know, the demand for its PlayStation 5 is off scale. No pandemic or global chip shortage will be able to suppress this demand.
Indeed, it could be argued that the PS5 supply chain disruption has further boosted demand. This is because consumers who don’t trust a game console might buy it simply because they don’t know when the next failure might occur. In this crazy year we’ve had, it seems almost inevitable that something unpleasant is on the horizon.
Also, the entertainment was very resilient, so it needs to be watched closely.
You probably won’t find too many blue-chip tech stocks as boring as Microsoft, but I find it a wonderful sign.
MSFT promotions represent the hottest initiative of the day: work from home. Millions of worker bees mostly rested for a year (or rested at the expense of the boss). Large corporations are now welcoming some of their employees back to their jobs.
Getting back to work can seem daunting. However, some people like the physical camaraderie that can only come from person to person. It is also nice to have a clear distinction between professional and personal life.
For better or worse, we may be working from home for longer than originally intended. If so, Microsoft’s cloud solutions have had a major impact that should serve MSFT’s stock in the future.
Credit card giant Mastercard, arguably the most controversial and riskiest blue-chip on this list, could see significant growth this year. If the incidence of Covid-19 declines due to increased vaccination efforts, consumers can meet their pent-up demand and go shopping.
To be clear, I think this idea is crazy. Over the past year, we have experienced a deadly pandemic, catastrophic storms and shortages in the global supply chain due to the blockage of the Suez Canal.
Don’t you think the universe is trying to tell us something?
In any case, I understand that Americans have been locked up at home and want to engage in consumer activities that were denied to them last year. The incredibly high personal savings rate suggests a lot of cash waiting to hit cheap Chinese goods.
However, keep in mind that working from home is a deflationary initiative (productivity goes up, overheads go down, and wages stay the same). Deflation usually signals recessions, not rallies. In addition, another disaster or disruption in consumer sentiment could lead to a drop in MA shares.
At the date of publication, Josh Enomoto was long on SONY.
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped award major contracts with Fortune Global 500 companies. Over the past few years, he has provided unique and critical insights to the investment markets as well as various other industries including legal, governance construction and healthcare.