10 Best Blue-Chip Stocks to Buy for the Long Term

Investors often hold blue-chip stocks at the core of their portfolios. Why? Blue-chip stocks are from companies that are large, well-established, and financially sound. These companies are leaders in their industries with strong brand names and reputations, and they generate dependable earnings. Blue-chip stocks usually boast consistent dividends and are often considered to be less risky, given the financial stability of these companies.

However, investors may differ on what is required for a stock to be considered a blue-chip stock. Some investors demand that a stock be included in a particular index, such as the Dow Jones Industrial Average. Others may only include dividend-paying stocks in their list of blue-chip stocks. Still others may have specific market capitalization thresholds for blue-chip stocks.

The blue-chip stocks on Morningstar’s list of the best ones to buy for the long term share a few qualities:

• The stocks are from companies included on Morningstar’s list of the Best Companies to Own for 2023. Companies on this list have wide Morningstar Economic Moat Ratings and predictable cash flows, and they are run by management teams that make smart capital-allocation decisions.
• These stocks look undervalued, which means they’re trading below Morningstar’s fair value estimates.
• Their market capitalizations top $100 billion.

10 Best Blue-Chip Stocks to Buy for the Long Term—June 2023

These are the largest firms by market capitalization on Morningstar’s Best Companies to Own list whose stocks are at least 10% undervalued as of June 2, 2023.

1. Berkshire Hathaway BRK.A BRK.B
2. Taiwan Semiconductor Manufacturing TSM
3. Roche RHHBY
4. Bank of America BAC
5. Pfizer PFE
6. Cisco Systems CSCO
7. Thermo Fisher Scientific TMO
8. Comcast CMCSA
9. Wells Fargo WFC
10. Honeywell International HON

Here’s a little bit about each of these blue-chip stocks for the long term. Data is as of June 2.

Berkshire Hathaway

• Market Capitalization: $718 billion
• Morningstar Price/Fair Value: 0.89
• Morningstar Style Box: Large Value
• Trailing 12-month Yield: 0.00%
• Morningstar Capital Allocation Rating: Standard
• Industry: Insurance—Diversified

Berkshire Hathaway is by far the largest company by market cap on our list of the best blue-chip stocks to buy for the long term—and it’s also the only company on the list that doesn’t pay a dividend. In every other way, however, Berkshire Hathaway is a quintessential blue-chip stock, with a long history of compounding value for shareholders through its insurance operations, noninsurance subsidiaries, and publicly traded portfolio. “We view Berkshire’s decentralized business model, broad business diversification, high cash-generation capabilities, and unmatched balanced sheet strength as true differentiators for the firm,” concludes Morningstar strategist Greggory Warren.

Taiwan Semiconductor Manufacturing

• Market Capitalization: $469 billion
• Morningstar Price/Fair Value: 0.71
• Morningstar Style Box: Large Blend
• Trailing 12-month Yield: 1.81%
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Semiconductors

Taiwan Semiconductor Manufacturing is the first of only two technology stocks to make our list of the best blue-chip stocks for the long term; after tremendous outperformance so far in 2023, many of the largest tech stocks look overpriced today. The world’s largest dedicated contract chip manufacturer, TSMC should be a significant beneficiary in high-performance computing, with additional upside potential from generative artificial intelligence, says Morningstar analyst Phelix Lee. We see limited downside in the stock’s price, as inventory correction has already been priced in, he adds. He also notes that TSMC has generated more stable earnings than many of its peers, which has led to more consistent (and growing) dividends over time. Taiwan Semiconductor’s stock trades 29% below our fair value estimate of $139.

Roche

• Market Capitalization: $258 billion
• Morningstar Price/Fair Value: 0.71
• Morningstar Style Box: Large Blend
• Trailing 12-month Yield: 3.17%
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Drug Manufacturers—General

The largest drugmaker on our list of the best blue-chip stocks to buy, Roche stock trades 29% below our fair value estimate of $57. The company’s drug portfolio and industry-leading diagnostics provide significant competitive advantages and underpin our wide economic moat rating, says Morningstar strategist Karen Andersen. “This Swiss healthcare giant is in a unique position to guide healthcare into a safer, more personalized, and more cost-effective endeavor,” she notes. With its biologics focus and innovative pipeline, we expect Roche to continue to achieve growth as its blockbusters face competition. We maintained our fair value estimate after Roche reported earnings.

Bank of America

• Market Capitalization: $227 billion
• Morningstar Price/Fair Value: 0.78
• Morningstar Style Box: Large Value
• Trailing 12-month Yield: 3.07%
• Morningstar Capital Allocation Rating: Standard
• Industry: Banks—Diversified

Bank of America stock trades 22% below our fair value estimate. Considered to be one of the preeminent banking franchises today, Bank of America has one of the best retail branch networks and overall retail franchises in the U.S., is a leading investment bank and a top-four U.S. credit card issuer, and owns the Merrill Lynch franchise, notes Morningstar strategist Eric Compton. The bank announced decent first-quarter earnings, with its deposit base and funding costs coming in as expected. And during Berkshire Hathaway’s annual meeting, Warren Buffett confirmed his support of the bank; Berkshire owns about 13% of the bank’s shares. We think Bank of America stock is cheap and worth $37 per share.

Pfizer

• Market Capitalization: $218 billion
• Morningstar Price/Fair Value: 0.80
• Morningstar Style Box: Large Value
• Trailing 12-month Yield: 4.22%
• Morningstar Capital Allocation Rating: Standard
• Industry: Drug Manufacturers—General

Pfizer stock offers the highest trailing yield among our list of the best blue-chip stocks to buy for the long term. We don’t think the market fully appreciates the pharmaceutical giant’s ability to offset major patent losses over the next five years, argues Morningstar director Damien Conover. We’re most bullish on several near-term launches, including the respiratory syncytial virus vaccine and immunology drugs ritlecitinib and etrasimod, says Conover. He also notes that solid midstage danuglipron data in diabetes and weight loss is promising, and that Pfizer could potentially launch competitive drugs into this class that could be disruptive. We think Pfizer stock is worth $48 per share; the stock currently trades 20% below that.

Cisco Systems

• Market Capitalization: $205 billion
• Morningstar Price/Fair Value: 0.89
• Morningstar Style Box: Large Value
• Trailing 12-month Yield: 3.06%
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Communication Equipment

Cisco Systems is the second tech stock on our list of blue-chip stocks for the long term. A dominant force in enterprise networking, Cisco is a leader in switching, routing, and wireless access that stands to benefit from trends toward hybrid work and hybrid cloud environments. “Though Cisco faces greater competition in new models of networking, we expect it to retain its leadership as enterprises adopt hybrid and multicloud environments with new technologies,” argues Morningstar analyst William Kerwin. While core markets offer slow and steady growth, newer software and cloud-centric businesses offer more upside for the company. Weak orders overshadowed good results last quarter, and we maintained our fair value estimate on the stock. Cisco stock is 11% undervalued relative to our $56 fair value estimate.

Thermo Fisher Scientific

• Market Capitalization: $200 billion
• Morningstar Price/Fair Value: 0.88
• Morningstar Style Box: Large Blend
• Trailing 12-month Yield: 0.24%
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Diagnostics & Research

Thermo Fisher Scientific stock is about 12% undervalued today. The premier life science supplier with an unmatched portfolio of products, resources, and capabilities, Thermo Fisher is committed to being a one-stop shop go-to provider of life sciences instruments and consumables, says Morningstar director Alex Morozov. To that end, the company has been “a serial acquirer,” notes Morozov, and is skilled at quickly integrating its acquisitions to extract meaningful synergies. And although we do think that management has done a great job of capital allocation in general, the dividend policy is lacking; next to Berkshire, Thermo Fisher has the lowest dividend yield of the blue-chip stocks on our long-term buy list. We think the stock is worth $590.

Comcast

• Market Capitalization: $166 billion
• Morningstar Price/Fair Value: 0.65
• Morningstar Style Box: Large Value
• Trailing 12-month Yield: 2.81%
• Morningstar Capital Allocation Rating: Standard
• Industry: Telecom Services

Trading 35% below our fair value estimate of $60, Comcast is the most undervalued stock on our list of blue-chip stocks to buy. Growth in Comcast’s cable business has slowed, and we expect it to continue to slow as more customers access fiber and wireless network alternatives. We nevertheless think Comcast will be able to limit broadband share losses in the coming years while enjoying solid pricing power, says Morningstar director Mike Hodel. NBCUniversal is more challenged, however, though we like the idea of expanding the theme park business around key content franchises, he adds. A solid balance sheet has allowed Comcast to aggressively repurchase shares and pay decent dividends.

Wells Fargo

• Market Capitalization: $152 billion
• Morningstar Price/Fair Value: 0.71
• Morningstar Style Box: Large Value
• Trailing 12-month Yield: 2.91%
• Morningstar Capital Allocation Rating: Standard
• Industry: Banks—Diversified

The second bank on our list of the best blue-chip stocks to buy, Wells Fargo has taken it on the chin as the banking crisis has unfolded. But Wells Fargo isn’t a regional bank; in fact, it remains one of the top deposit gatherers in the U.S. The bank beat first-quarter estimates, and deposits slipped modestly. However, the bank is in the midst of a multiyear rebuild, with years of expense-saving-related projects ahead and additional investment in its existing franchises, says Morningstar strategist Eric Compton. The bank also has a sizable presence in the middle-market commercial space and boasts a large advisor network, which support its wide economic moat rating. Wells Fargo stock trades 29% below our fair value estimate of $58.

Honeywell

• Market Capitalization: $131 billion
• Morningstar Price/Fair Value: 0.88
• Morningstar Style Box: Large Blend
• Trailing 12-month Yield: 2.05%
• Morningstar Capital Allocation Rating: Exemplary
• Industry: Conglomerates

Rounding out our list of the best blue-chip stocks to buy for the long term, Honeywell is a global multi-industrial behemoth. The company wears the blue-chip title with ease, as it traces its roots back to 1885, producing a predecessor to the modern thermostat, explains Morningstar senior analyst Josh Aguilar. We view Honeywell as one of the highest-quality companies in the diversified industrials space, he adds. The company boasts an exceptionally strong balance sheet and management practices a disciplined M&A process that doesn’t overpay for growth. Honeywell stock is 12% undervalued relative to our $225 fair value estimate.

What Are the Morningstar Fair Value Estimate, Style Box, and Capital Allocation Rating?

The Morningstar fair value estimate represents what Morningstar analysts think a particular stock is worth. Fair value estimates are rooted in the fundamentals and based on how much cash we think a company can generate in the future, not on fleeting metrics such as recent earnings or current stock price momentum. Learn more about how Morningstar values stocks in Morningstar’s Guide to Stock Investing.

The Morningstar Style Box, meanwhile, is a nine-square grid that provides a graphical representation of the investment style of stocks, bonds, or funds. Based on a series of inputs—including a company’s historical and long-term projected growth and its historical and forward-looking price multiples—a stock is classified as either a value stock, a growth stock, or a core stock. A stock is also classified as either small-cap, mid-cap, or large-cap based on its market capitalization.

Lastly, the Morningstar Capital Allocation Rating is an assessment of how well a company manages its balance sheet investments and shareholders’ distributions. Analysts assign each company one of three ratings—exemplary, standard, or poor—based on their assessments of how well a management team provides shareholder returns.

How to Find More Blue-Chip Stocks to Buy

Of course, there are many other criteria investors can use to find blue-chip stocks to buy for the long term. Here are some tools that investors can use to find more blue-chip stock ideas to research further:

• Investors can review Morningstar’s lists of large-cap value stocks, large-cap core stocks, and large-cap growth stocks. The lists aren’t restricted by quality or valuation; rather, they’re complete lists of the large-cap stocks in Morningstar’s database and broadly represent a starting point for finding blue-chip stocks.
• Investors can use the Morningstar Investor screener to create their own list of blue-chip stocks that meet their specific criteria. Set the Investment Type to stocks, and then choose what market capitalization threshold you’d like in the Criteria section. You can then refine your search for blue-chip stocks even further by adding valuation, profitability, and/or dividend requirements. You can also screen your list of blue-chip stocks by Morningstar Rating or economic moat.
• Investors who’d rather invest in blue-chip stocks through a managed product like an exchange-traded fund or a mutual fund can use the Morningstar Investor screener. For Investment Type, choose either mutual fund or ETF. In Search Securities, type in the keyword “blue chip.” Some highly rated funds and ETFs focused on blue-chip stocks include Fidelity Blue Chip Growth FBGRX and T. Rowe Price Blue Chip Growth ETF TCHP. Just remember: large-company funds and broad U.S. stock index funds own blue-chip stocks; you may not necessarily need a separate blue-chip fund if you already own a core stock fund.

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