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Navellier Growth

Blue Chips to Fight the Market Blues

May 29, 2012

Stock of the Day

There are four types of stocks I like to own in my optimal portfolio: blue chips, small caps, global growth stocks and super-high-alpha stocks. Today, I want to focus on blue chip stocks.

My Blue Chip Growth service focuses on large-cap companies, specifically those with a market size of $10 billion or more, that have growing sales, and incredible earnings growth.

Just this month MarketWatch touted our investing success stating: "Blue Chip Growth is obviously catching some sort of market thermal." That thermal and relative strength is caused by (1) relentless stock buyback programs, (2) high dividend yields for many Blue Chip Growth stocks, and (3) superior sales and earnings relative to the overall stock market.

So take note; not all blue chip stocks are worthy of your hard-earned investing dollars. Here's a list of my recommended 3 blue chip stocks to buy and 7 blue chips to avoid:

3 STOCKS TO BUY

7 STOCKS TO AVOID

Apple

Alcoa 

Alexion Pharmaceuticals

Best Buy

Whole Foods

Bank of America

 

Panasonic

 

General Motors

 

Credit Suisse Group

 

Sprint-Nextel

These three blue chip stocks had a great first quarter earnings announcement season and that strength is obviously resulting in persistent institutional accumulation that is often "stabilizing" these stocks on down days.

Just look at Apple Inc. (AAPL) and you'll see what I mean.

This is a company that I have been recommending in Blue Chip Growth since late 2009 and have racked up 200% gains—and the ride isn't over by a long shot.

The company reported blowout top- and bottom-line growth for the first quarter. Compared with the same quarter last year, Apple Inc.'s net profits boomed 94% to $12.30 per share. Analysts forecast earnings of just $10.06 per share, so Apple posted a 22% earnings surprise!

Over the same period, sales jumped 59% thanks to the sale of over 35 million iPhones in the first quarter, 11.8 million iPads and 4 million Macs.

In the last seven trading days, the stock is up 8% while the Dow is flat.

That is exactly the type of blue chip stock you need as the foundation of your portfolio in this market. It's a great example of a stock that zigs when the market zags.

So is Alexion Pharmaceuticals which is bucking the market trend and posting gains in May, as is Whole Foods.

Volatile markets may try to keep these stocks down, but it's a losing battle. It's like trying to hold a balloon filled with helium under water. You have to use a lot of force and in the end you can't keep the balloon from rising.

This is why I recommend that you have a solid foundation of blue chip stocks in your portfolio. If you're a conservative investor, blue chips should make up about 70% of the four horsemen stocks I mentioned earlier in your portfolio. If you're particularly aggressive, you could scale back to a 20% allocation for blue chip stocks.

We'll talk more about these allocations once we cover the remaining three horsemen, global growth stocks, super-high-alpha stocks, and next up on Thursday, small-cap stocks.

In the meantime, now is the perfect time to pick up some blue chip stocks—while they are at bargain prices and just before earnings season pushes them higher. So don't delay. Take a look at the stocks I've mentioned today as soon as possible.

Sincerely,

Louis Navellier

Louis Navellier

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