Blue-chip stocks represent ownership in established, financially sound businesses, but are the blue-chips you’re taking a look at today in the “Green Zone stocks” category?
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (or VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone,” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to positions. View any move into the Red Zone as a warning sign to exit your position for now.
These three blue-chip stocks to watch are currently in the “Green Zone.”
Shares in mobile chip and infrastructure software giant Broadcom (NASDAQ:AVGO) have been in the “Green Zone stocks” category for over seven months. AVGO has performed extremely well during this time frame. This is largely due to the emergence of the generative artificial intelligence (or generative AI) trend.
AVGO stock has slipped lower more recently, but even as excitement over AI takes a breather, keep in mind that AI growth isn’t slowing down. As BMO Capital analyst Ambrish Srivastava cited in a recent upgrade, AI-related growth, plus a rebound in demand among Broadcom’s non-AI customers, points to a double-digit jump in earnings in the coming years.
Better yet, when you consider the cost and growth synergies that may result once Broadcom’s pending merger with VMware (NYSE:VMW) closes, earnings growth could come in even stronger than Srivastava’s forecast. TradeSmith’s volatility quotient is 25.68%, which makes it a medium-risk stock.
Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), Warren Buffett’s investing vehicle, holds positions in numerous blue-chip stocks. It’s also a blue-chip in its own right, given the holding company’s steady cash flow and strong balance sheet (including around $142 billion in cash and short-term investments).
BRK-A stock has of course been a long-term winner, yet in the near term, it has especially been on a tear. With this, it should come as no surprise that BRK- A has been in the Green Zone for more than three months. While not for certain, this trend could continue.
The stock’s blue-chip reputation could help it maintain its current level of appeal among investors. Even if stocks enter a downturn, there could be a flight to quality toward names like this one. TradeSmith’s current volatility quotient for Berkshire Hathaway is 14.67%, which makes it a low-risk stock.
Johnson & Johnson (JNJ)
A dividend king (with 60 years of consecutive dividend growth) in a recession-resistant industry, Johnson & Johnson (NYSE:JNJ) is a prime example of a blue-chip stock. However, despite this status, shares in the healthcare and pharmaceutical giant have produced underwhelming returns in recent years.
Since 2018 (assuming you reinvested the dividends into more shares), an investment in JNJ has produced annualized total returns of around 6%, trailing the nearly 11% total returns generated by the S&P 500 during this timeframe. However, things could be turning a corner.
JNJ entered the Green Zone five days ago. The spinoff of the company’s slower-growing consumer healthcare unit Kenvue (NYSE:KVUE) is now complete. This may place J&J on the path to experience a resurgence in earnings growth. In turn, this would drive a further rally for shares. TradeSmith’s current volatility quotient for Johnson & Johnson is 13.22%, which makes it a low-risk stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.