Is It Time to Buy Blue Chips?

December 30, 2009

You may hear a lot of noise right now about how buy and hold is dead, or how buying blue chip stocks can only return profits of a few percentage points a year ... Well don't believe it!

Just because the market had a very bad 2008 and a slow start to 2009 doesn't mean that everyone should be holding stocks for hours or days instead of months or years. It also doesn't mean that high-stakes trading with micro-cap stocks or complicated options is the only way to make money. The fact of the matter is that blue chips have been doing quite well in recent months and should continue to surge as the market builds on the recovery in 2010.

Consider that if you just tracked the market since the March lows, you'd be sitting on 60% returns in about nine months time. Not too shabby! What's more, those returns enjoyed by buy-and-hold blue chip investors come without high-stress market watching to time split-second trades or extra fees from dozens of transactions a week, or the stress and clutter caused by extra research, extra spreadsheets and extra doubts over whether you've made the right move.

If that 60% return isn't enough, now consider the fact that Blue Chip Growth has trounced the S&P 500 by $6-to-$1 for almost 12 years–and has done it the "buy and hold" way. Look at some of our most profitable trades in recent years:

+477% in EMC Corp. (EMC) over 3 ½ years
+371 in America Movil (AMX) over 4 years
+307 in Dell (DELL) over 2 years

Those are impressive returns, and these gains have nothing to do with complex investment schemes or risky strategies that could leave you penniless.

The secret to buying blue chip stocks is to do exhaustive research on the front end of your investment. With my comprehensive Portfolio Grader stock ranking tool, I break down 5,000 stocks across 8 categories like sales growth, earnings expansion and profit margins. After I find of group of stocks that make the grade, then I calculate the risk of a stock and the likelihood that it will trend upwards in both the short term and for many months to come.

What we're left with is an elite group of 20 or 30 blue chips that are the very best stocks on Wall Street–stocks that you can rely on to beat the market thanks to their superior fundamentals. These strong characteristics also ensure that a company is not just a flash in the pan, but has the staying power to produce steady returns for the long term.

My calculations uncovered fewer stocks in 2009 as the market was clouded by uncertainty. But now that the recovery is taking hold, Portfolio Grader is identifying some breakout blue chips that I expect to provide market-trouncing returns over the next several months.

Best of all, these powerful large-cap stocks are conservative and low-risk investments that provide your portfolio with safety and security. It's the best of both worlds–explosive profit potential and the stability provided by some of the most iconic companies on Earth.

Now is the time to be buying blue chip stocks to benefit from the recovery in 2010. As economic indicators continue to point upwards, these investments will not just keep up with other complicated investments but do so without the headaches and high risk.

 

Get Louis Navellier's top 5 stocks to own for 2010. Not only will he tell you the best sectors right now, but the best stocks, too! Download his latest investing report now and also find out everything you need to know to make the right picks in this current market–All Free!