The objective of healthy returns in a quick time is generally achieved by exposure to growth stocks. However, there are opportunities where blue-chip stocks can surge higher from undervalued levels. The advantage is that investors can have a low-beta portfolio that delivers returns that can potentially match the returns of a high-beta portfolio. The focus of this column is on blue-chip stocks that are likely to double within the next 24 months.

It’s not uncommon to see blue-chip stocks trading at a valuation gap. It can be on the back of industry headwinds or temporary growth concerns. However, it’s always a good buying opportunity if the company has strong fundamentals and robust cash flow visibility. The comeback from oversold levels can be quick and rewarding for an investor.

I have focused on blue-chip stocks that are likely to benefit from impending rate cuts and are undervalued. With expansionary policies, these stock ideas can surge higher within the next 12 to 24 months.

Barrick Gold (GOLD)

While gold has trended higher, Barrick Gold (NYSE:GOLD) stock has remained sideways in the last 12 months. I expect a breakout rally for this blue-chip gold miner as the precious metal remains in an uptrend. My view is underscored by the point that GOLD stock trades at an attractive forward P/E of 14.3.

With the possibility of multiple rate cuts, Citi believes that gold is likely to trade at $3,000 an ounce in the next 6 to 18 months. If this target holds true, Barrick Gold will be positioned for healthy revenue and cash flow upside. Additionally, robust dividend growth is likely for a stock that already has a dividend yield of 2.3%.

It’s worth noting that Barrick Gold reported an operating cash flow of $760 million for Q1 2024. With the likelihood of higher realized prices, the annual OCF potential is in the range of $4 to $5 billion. This will provide Barrick with high flexibility to make aggressive exploration investments.

Vale (VALE)

If I had to pick one industrial commodity stock, I would consider Vale (NYSE:VALE) from the perspective of valuations. The blue-chip stock has been in a sharp downturned, but the selling is overdone and the company continues to deliver healthy numbers.

It’s worth noting that macroeconomic challenges have impacted sentiments for industrial commodities. However, with rate cuts coming and the possibility of fiscal stimulus in many countries, I expect commodities to trend higher.

For Q2 2024, Vale reported a steady increase in iron ore production and sales. The commodity major also has projects underway to increase capacity by 50mt by 2026. At the same time, copper and nickel production diversifies the company’s portfolio of assets.

Even with a relatively soft commodity price, Vale reported adjusted EBITDA of $4 billion for Q2 2024. If commodity trends are higher and production upside targets are achieved, Vale is likely to report an EBITDA of more than $20 billion. This would imply healthy operating and free cash flows for dividends coupled with capital investments.

Target Corporation (TGT)

Among retail blue-chip stocks, Target Corporation (NYSE:TGT) looks undervalued at a forward P/E of 14.5. While Walmart (NYSE:WMT) stock has trended higher by 30% for the year-to-date, TGT stock has declined by 5%.

I however believe that a strong reversal is impending and the stock will surge in the next 12 to 24 months. It’s worth noting that with rate cuts on the cards, consumption spending is likely to accelerate. This is one reason to be bullish on Target.

Additionally, the retailer has guided for better numbers in the coming quarters. For Q1 2024, Target reported a comparable sales decline of 3.7%. However, for the full year, the company has guided for 0 to 2% increase in comparable sales.

At the same time, operational efficiency is in focus and is likely to translate into EBITDA margin improvement. The launch of products for the company’s owned brand is also likely to support margin expansion.

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) any positions in the securities mentioned in this article.