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It can be hard to remember that there are still plenty of the best blue-chip stocks under $20 to be found outside of the regular suspects.
The market participants are always more excited about growth stocks and penny stocks. That’s the place to find multi-baggers. Another reason is that there are low-priced growth stocks that investors prefer as they fit the equity investment budget.
There are several blue-chip stocks under $20 that are worth considering. While there is a lot of coverage and noise around growth and penny stocks, blue-chip stocks are silent killers. In a bull market, blue-chip stocks are performers. In a bear market, these stocks provide regular cash flows (dividends) and also protect the portfolio from capital erosion.
It’s also a fact that even blue-chip companies go through challenging times. This results in stocks of these blue-chip companies trading at a valuation gap. My focus is on blue-chip stocks under $20 that seem to be deeply undervalued. I believe that these stocks are poised for a 100% rally in the next 24 months.
FFord12.18GOLDBarrick Gold14.95TAT&T$15.83Ford (F)
Source: JuliusKielaitis / Shutterstock.comAmong blue-chip stocks under $20, Ford (NYSE:F) seems deeply undervalued. The stock currently trades at a forward price-earnings ratio of 5.9 and also offers a dividend yield of 3.75%. I would not be surprised if F stock doubles in the next 24 months.
The International Energy Agency indicated that electric vehicles are likely to account for 60% of new car sales by 2030. Ford has made an aggressive push towards revamping its portfolio to EVs. This is likely to ensure that growth sustains for the company.
Ford has recently commenced construction of an EV-focused facility. With the company targeting annual production of two million EVs by 2026, the new plant will support the vision.
As of Q2 2022, the company reported a total liquidity buffer of $28.7 billion. Therefore, financing aggressive investment in the EV segment is unlikely to be a challenge.
Overall, Ford is in a major business transformation phase and the valuation gap provides a good long-term entry opportunity.
Barrick Gold (GOLD)
Source: Piotr Swat / Shutterstock.comPrecious metals have been in a correction mode with contractionary monetary policies. However, with rising geo-political tensions, inflation and growth uncertainties, I remain bullish on gold for the long term. The correction in gold mining stocks, therefore, presents an attractive entry opportunity.
Barrick Gold (NYSE:GOLD) stock is among the best blue-chip stocks under $20. After a correction of 40% in the last six months, it seems that the stock is deeply undervalued. The 2.8% dividend yield stock is a long-term value creator.
One reason to like Barrick Gold is strong fundamentals. As of Q2 2022, the company reported cash and equivalents of $5.8 billion. With a strong balance sheet and sustained free cash flows, dividends are safe even as gold trends lower.
From a long-term perspective, Barrick reported 69 million ounces of gold reserves as of December 2021. Last year, the company also replaced its depletion of gold reserves by 150%. Therefore, production is likely to remain stable in the coming years. With a strong cash buffer, reserve replacement is also likely to remain robust.
AT&T (T)
Source: Lester Balajadia / Shutterstock.comThe best time to buy a stock is when sentiments are bearish. In particular, if the business outlook is positive for the long-term. This holds true for AT&T (NYSE:T) stock. After a correction of 18% for year-to-date 2022, the blue-chip stock seems grossly undervalued.
My view is underscored by the fact that the 7.0% dividend yield stock trades at a forward price-earnings ratio of 6.2. Further, 21 analysts have a 12-month median price target of $22 for T stock. This would imply an upside potential of almost 40% from current levels.
It’s worth noting that between 2016 and 2026, AT&T invested $105 billion in its wire line and wireless network. The company’s 5G reach covers more than 255 million people. With continued investments, the company is well positioned to see sustained upside in subscribers.
AT&T has also guided for free cash flow of $14.0 billion for 2022. Healthy FCF will ensure that dividends sustain. Also, AT&T is positioned to further improve its credit metrics.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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