When some stocks fall, it's best to run for the hills. But when others decline, it's a great buying opportunity. The difference ultimately stems from how strong the companies' underlying businesses are.
Blue chip companies, by definition, have solid, resilient businesses. When their share prices sink, it's usually only a matter of time before they rebound. Here are three beaten-down blue chip stocks to buy right now.
1. CVS Health
CVS Health (CVS +0.66%) ended 2022 with its shares down nearly 16%. The stock hasn't gotten off to a great start this year, either, tumbling close to 6%. Don't think for a second, though, that CVS won't be able to mount a solid comeback.
NYSE: CVS
Key Data Points
Wall Street remains quite bullish about CVS Health. The consensus 12-month price target reflects an upside potential of more than 30%. Of the 24 analysts who cover the stock and were surveyed by Refinitiv in January, 15 rate CVS as either a buy or a strong buy.
All three of CVS Health's business segments continue to perform well. The pharmacy services segment, which includes the CVS Caremark pharmacy benefits management unit, is leading the way. CVS' weakest segment -- retail/LTC -- should be able to generate stronger growth with the company's plans to sell its Omnicare long-term care pharmacy business.
This stock also pays investors to wait for the bounce. CVS Health's dividend yield tops 2.8%. The company has increased its dividend by 21% over the last two years.
2. Johnson & Johnson
Johnson & Johnson (JNJ 0.15%) beat the overall market in 2022 with a modest gain of 3%. It's a different story so far this year, though, with the healthcare stock down more than 4%. However, I'm optimistic that J&J will be able to rebound after its shaky start in 2023.
NYSE: JNJ
Key Data Points
The prospects of a less aggressive stance by the Federal Reserve could hint that the U.S. dollar will weaken somewhat this year. That would be good news for Johnson & Johnson. Foreign exchange headwinds caused by the strong dollar made a big dent in the company's sales in the fourth quarter of 2022.
Investors also have a major milestone to look forward to later this year. Johnson & Johnson plans to spin off its consumer healthcare business. This unit has been a drag on growth in recent years. The spinoff will leave J&J with its faster-growing pharmaceutical and medtech units.
As was the case with CVS Health, Johnson & Johnson's dividend helps make any temporary pullbacks less painful. The company belongs to the elite group of stocks known as Dividend Kings thanks to its 60 consecutive years of dividend increases. J&J's dividend yield currently stands at almost 2.7%.
3. UnitedHealth Group
UnitedHealth Group (UNH +2.60%) is both the best and worst performer among these three blue chip stocks, depending on which year you look at. The healthcare stock jumped nearly 6% last year. So far in 2023, however, UnitedHealth Group's shares have fallen 7%. But this stock has beaten the S&P 500 in nine of the past 10 years. I suspect it will do it again in 2023.
NYSE: UNH
Key Data Points
The company is probably best known for its health insurance business. I look for another year of solid growth from this unit thanks in large part to rising Medicare Advantage membership.
While UnitedHealth ranks as one of the biggest health insurers, the company's Optum business is growing faster and is more profitable than its insurance business. Optum includes:
- Optum Health -- a provider of care, care management, wellness, and health-related financial services
- Optum Insight -- a provider of healthcare data, analytics, and consulting services
- Optum Rx -- a provider of pharmacy benefits management services
UnitedHealth Group's dividend yield of 1.34% probably won't fire up many investors. However, over the past 10 years the company's dividend has boosted its total return from close to 780% to nearly 925%. UnitedHealth Group is actually a better blue chip dividend stock than meets the eye.
