Blue-chip stocks are large, well-known companies with excellent reputations. These stocks have a proven track record and a history of delivering solid returns over the long term.
Historically, these types of stocks would be companies with decades of dominance in their respective industries. However, as our economy goes through a digital transformation, a blue-chip can also be younger tech stocks with disruptive business models.
While blue chips are not immune to market downturns, they’ve shown a history of weathering storms and bouncing right back. That’s why they are so appealing to investors and why I recommend the following three industry leaders: Salesforce.com Inc (CRM), Alphabet Inc. (GOOGL), and Adobe Inc. (ADBE).
Salesforce.com Inc (CRM)
CRM represents one of the better long-term growth stocks in the software industry. The company has a 30% market share in the sales force automation space and is well-positioned to continue capturing more of the $130 billion market. The company is considered a leader in each of the markets it serves, and its customer retention has been improving over time.
CRM has been a primary beneficiary of the cloud migration and is benefiting from strong demand as customers are undergoing a digital transformation. In essence, the rapid adoption of its cloud-based offerings is driving demand for its products. The company has been adding more features such as customer service, marketing automation, e-commerce, analytics, and artificial intelligence, with each of them tightly integrated. Management has also emphasized expanding its margin in recent quarters.
The stock has an overall grade of B, which translates into a Buy in our POWR Ratings system. The company has a Growth Grade of B, which isn’t surprising as revenue is expected to rise 21.5% year over in the current quarter. Earnings are forecasted to grow 25.7% in the same quarter. CRM also has a Quality Grade of B due to its healthy balance sheet. The company had $12 billion in cash as of the most recent quarter, compared to no short-term debt.
We also grade CRM based on Value, Momentum, Stability, and Sentiment. You can find those grades here. CRM is ranked #13 in the Software – Business industry. You can find other top stocks in that industry by clicking here.
Alphabet Inc. (GOOGL)
GOOGL is the king of online search. It dominates the online search market with a global share above 80%. This generates strong revenue growth and cash flow. The majority of its revenue is derived from delivering online advertising and by selling apps on Google Play. The company is well-positioned long-term due to search, its Android software, and YouTube revenue.
The increasing adoption of mobile devices has been a boon for the company. Android’s dominant global market share of smartphones leaves the company well-positioned to grab market share as search traffic shifts from desktop to mobile. The company has also gained inroads into the growing cloud market. GOOGL has been able to leverage its own private cloud platform’s expertise to increase its market share in the public cloud realm.
GOOGL has an overall grade of B or a Buy rating in our POWR Ratings service. The company has Momentum Grade of B as its stock has shown bullish momentum over the near, mid, and long-term. GOOGL also has a Sentiment Grade of B indicating that it is well liked by analysts. Forty out of forty-three analysts have a Buy or Strong Buy rating on the stock.
To access the rest of GOOGL’s grades (Growth, Value, Stability, and Quality), click here. GOOGL is ranked #2 in the Internet industry. For other top stocks in that industry, make sure to visit this link.
Adobe Inc. (ADBE)
While CRM dominates sales force automation and GOOGL dominates search, ADBE is the content creation software leader. What was originally a company known for its PDF reader and Photoshop, ADBE has transformed into a diversified software company that offers electronic document technology and graphic content authoring applications to creative professionals, designers, developers, and enterprises.
The company saw strong customer engagement levels on its website due to the remote working environment, and this isn’t expected to change anytime soon with its offerings on the cloud. The company remains the de facto standard in content creation software with its Document Cloud offering. As smartphone purchases continue, more and more people are using its PDF file format. And the addition of marketing services through its digital experience segment should drive growth going forward.
ADBE is rated a Buy with a grade of B in our POWR Ratings service. The company has a Sentiment Grade of B due to its analyst ratings and price targets. Twenty-two out of twenty-seven analysts rate the company a Buy or Strong Buy. Plus, its stock is trading 17% below its average analyst price target. The company also has a Quality Grade of A due to its rock-solid balance sheet.
ADBE has a current ratio of 1.3, which indicates it has more than enough liquidity to meet short-term obligations. Plus, the stock has a high return on equity of 41.1%. For the rest of ADBE’s grades (Growth, Value, Momentum, and Stability), click here. ADBE is ranked #20 in the Software -Application industry. For other top-ranked stocks in the industry, click here.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More…
More Resources for the Stocks in this Article
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