3 Blue-Chip Stocks to Buy for High Total Returns by 2025


  • These are the undervalued blue-chip stocks to buy for high total returns by 2025.
  • Newmont Corporation (NEM): Bullish on gold trending higher and Newmont is likely to deliver robust free cash flows.
  • Pfizer (PFE): A deep pipeline of new molecular entities with acquisitions likely to support growth.
  • AT&T (T): Strong free cash flows will ensure that the company meets its deleveraging target and credit metrics continue to improve.
blue-chip stocks - 3 Blue-Chip Stocks to Buy for High Total Returns by 2025

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Blue-chip stocks generally command fair valuation or trade at a premium to market valuation. The reasons include a low beta, stable cash flows and a healthy dividend yield. However, there are blue-chip stocks that trade at undervalued levels. This provides a golden opportunity for investors to add quality to their portfolios.

Blue-chip companies may face near-term headwinds. These can be industry or company specific. Strong fundamentals ensure that blue-chip names navigate challenging times and continue to invest in growth. Therefore, when blue-chip stocks trade at a valuation gap, the name may deliver high total returns in the next few years.

This column focuses on three blue-chip stocks that have been relatively depressed in the last few quarters. However, these stocks are poised for a break-out rally with an improving growth outlook. Let’s talk about the positives that make these undervalued names worth considering.

Newmont (NEM)

Newmont logo on a mobile phone screen
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Newmont (NYSE:NEM) is among the best blue-chip stocks to buy for high total returns by 2025. After a correction of 31% in the last 12 months, NEM stock looks undervalued and poised for a strong comeback rally.

It’s noteworthy that gold continues to trade above $2,000 an ounce even after a relatively strong jobs report in January. Further, geopolitical tensions will support gold prices, and I am bullish on the precious metal’s remaining uptrend.

Newmont is well-positioned to benefit from an investment-grade balance sheet and quality asset base. To put things into perspective, Newmont reported $6.2 billion in liquidity and a net-debt-to-adjusted-EBITDAX of 0.7x as of Q3 2023.

Further, for Q3, the company reported $1 billion in operating cash flows. With gold trending higher, the annual cash flow visibility will likely be $4.5 to $5 billion for the year. This would provide flexibility for dividend growth and aggressive exploration investments.

Pfizer (PFE)

Pfizer logo on Pfizer building. Pfizer is an American pharmaceutical corporation.
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Pfizer (NYSE:PFE) is another blue-chip stock that has witnessed a deep correction in the last few quarters. This has been behind growth concerns as COVID-19 vaccine revenues decline. However, the correction in PFE stock is overdone, and at a forward price-earnings ratio of 12.4, the stock looks attractive. Further, the stock offers a dividend yield of 6.11%.

While revenue de-growth has impacted sentiments, I see the following positives. First, Pfizer received a record number of nine new molecular entity approvals by the U.S. Food and Drug Administration in 2023. This will have a positive impact on revenue in the coming years. Further, the current product pipeline has 31 molecular entities in phase three. The deep pipeline will ensure the continued launch of new products.

Further, Pfizer has been active on the acquisition front. The company completed the acquisition of Seagen in December 2023. This strengthens Pfizer’s position in the oncology segment. By 2030, Pfizer expects $25 billion in incremental revenue from new business deals.

AT&T (T)

Image of AT&T (T stock) logo on a gray storefront.
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AT&T (NYSE:T) stock has been recovering after a sustained sell-off. In the last six months, T stock has increased by 23.7%. However, even after the uptrend, the stock trades at an attractive forward price-earnings ratio of 8. I expect the rally to sustain this 6.3% dividend yield stock.

Recently, AT&T reported Q4 2023 numbers with several positives to note. First, AT had a full-year free cash flow of $16.8 billion. This was higher than the guidance, and robust free cash flows would support deleveraging and dividends.

Further, the company’s mobility service and fiber business witnessed subscriber growth. The company’s mid-band 5G spectrum covers 210 million people, and I expect growth to be sustained backed by a strong infrastructure.

I must add that AT&T has guided for $17 to $18 billion in free cash flows for this year. With robust FCF, the company expects to achieve a net debt-to-adjusted EBITDA target of 2.5x by the first half of 2025. With all these positive developments, T stock will likely close the valuation gap in the coming quarters.

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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