The markets go through times where making money is relatively easy and that seemed to be the case until the recent correction from highs. While potential rate cuts can support equities, I believe that the markets are likely to be volatile in the next 6 to 12 months.

This does not imply that investors complete stay away from high-beta growth stocks. However, it’s a good idea to go overweight on undervalued low-beta stocks where the downside seems capped. This column focuses on three stocks that trade at a valuation gap and have strong fundamentals.

Besides providing steady returns that can best inflation, these stocks will lower the overall portfolio beta. At the same time, these undervalued stocks have a healthy dividend yield. Total returns are therefore likely to be healthy.

Let’s therefore discuss the fundamental reasons to be bullish on the blue-chip stocks that have low volatility.

Pfizer (PFE)

After a sharp correction last year, Pfizer (NYSE:PFE) stock has remained sideways for year-to-date. The pharma major trades at an attractive forward P/E of 10.9 and offers a healthy dividend yield of 5.88%. I expect a rally from oversold levels in the coming quarters.

One reason for Pfizer remaining subdued is decline in sales in a post-covid era. However, it’s important to note that Pfizer has a strong pipeline of drug candidates. That’s likely to ensure steady growth in the coming years.

To put things into perspective, Pfizer had a pipeline of 113 programs as of June. This included 33 phase three and 27 phase two candidates. Potential blockbuster drugs would imply healthy growth.

At the same time, Pfizer has been active on the acquisition front. After the closure of the Seagen acquisition, the pharma company has an attractive oncology pipeline. For Q2 2024, the oncology segment reported a healthy growth of 27% on a year-on-year basis.

AT&T (T)

AT&T (NYSE:T) stock has been in an uptrend with a rally of 36% in the last 12 months. However, T stock trades at a forward P/E of 8.9 and is undervalued. Additionally, the stock offers a healthy dividend yield of 5.7%. I expect the positive momentum for this low-beta stock to sustain.

An important point to note is that the rally has been backed by positive fundamental developments. For 2024, AT&T has guided for free cash flow of $17 to $18 billion. Further, the company has maintained its guidance to achieve debt-to-adjusted EBITDA of 2.5x by the first half of 2025. As credit metrics improve, T stock is likely to trend higher.

Another positive is that AT&T has reported continued growth in fiber and mobility subscribers. The positive operational trend is on the back of big investments in the last five years. Growth in subscribers has been coupled with upside in average revenue per user. If this trend sustains, there is a strong case for continued growth in free cash flows.

Newmont Corporation (NEM)

The world is facing macroeconomic headwinds and rising geopolitical tensions have been a concern. Further, multiple rate cuts are likely in the next 12 to 18 months to support GDP growth. All these factors are positive for gold and even if equities trend lower, the precious metal is likely to trend higher. It would also imply that quality gold mining stocks surge.

Newmont Corporation (NYSE:NEM) is an attractively valued gold mining stock that’s worth considering. NEM stock has rallied by 15% for year-to-date, but remains attractive at a forward P/E of 16.4. Additionally, the stock offers a dividend yield of 2.1%.

It’s expected that gold will remain in an uptrend and this is likely to benefit Newmont in the form of higher realized prices. As cash flows swell, I expect healthy dividend growth coupled with value creation through share repurchase.

At the same time, Newmont has a quality asset base of gold and copper. It’s likely that capital investments will be ramped-up and will provide steady growth visibility. It’s therefore a good time to consider fresh exposure to NEM stock.

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.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.