The best blue-chip stocks under $20 come from a mix of segments. After all, investors seek refuge in blue-chip stocks in uncertain economic conditions.
Given the current macroeconomic scenario, investors are likely to remain overweight on blue-chip stocks through the year.
Several blue-chip stocks trade at a high price and diversification becomes difficult for a small portfolio. However, the best blue-chip stocks under $20 also trade at attractive valuations.
I believe that these blue-chip stocks under $20 are poised for a meaningful rally from current levels. Additionally, these stocks offer an attractive dividend yield. Therefore, total returns on these blue-chip stocks will comfortably be above the rate of inflation.
Let’s discuss the reasons that makes these stocks under $20 attractive for 2023 and for the long term.
| T | AT&T | $19.28 |
| GOLD | Barrick Gold | $18.92 |
| VALE | Vale | $16.32 |
AT&T (T)
AT&T (NYSE:T) stock is among the seriously undervalued blue-chip stocks under $20.
At a forward price-earnings ratio of 7.0, T stock is a screaming buy. Additionally, the stock also offers a robust dividend yield of 6.0%.
With the spin-off of the media division last year, AT&T is a leaner and more focused organization. Importantly, the company has been pursuing aggressive deleveraging.
For the first nine months of 2022, AT&T reduced debt by $25 billion. As credit metrics improve, T stock is likely to trend higher.
The company has also guided for $14 billion in free cash flow for 2022. With sustained growth in phone and fiber subscribers, it’s likely that cash flows will continue to swell. AT&T has already made big investments in boost its 5G infrastructure. This is likely to translate into higher average revenue per user in the coming years.
Barrick Gold (GOLD)
With fears of a recession in 2023, gold has been trending higher.
In all probability, aggressive contractionary monetary policies have ended in 2022. I would add Barrick Gold (NYSE:GOLD) among the best blue-chip stocks under $20. The gold miner is positioned to benefit as gold trades above $1,800 an ounce.
A major reason to like Barrick Gold is that it is an investment-grade balance sheet and robust cash flow potential. For the first nine months of 2022, Barrick reported an operating cash flow of $2.7 billion.
The company also reported cash and equivalents of $5.2 billion. Robust financial flexibility implies sustained dividends and steady production.
From an asset perspective, Barrick reported proved and probable mineral reserves of 69 million ounces as of December 2021.
For the same period, the company’s measured and indicated gold resources were 160 million ounces. Reserve replacement is therefore likely to remain healthy with flexibility for investment in exploration activity.
Vale (VALE)
Vale (NYSE:VALE) is another deeply undervalued blue-chip stock that trades under $20.
Even after returns of 18% in the last 12 months, VALE stock trades at a forward price-earnings ratio of 4.4. The stock also offers an attractive dividend yield of 8.65%.
It’s worth noting that commodity prices declined on a relative basis in Q3 2022. Even in this scenario, Vale clocked a turnover of $9.9 billion and a proforma adjusted EBITDA of $4 billion. Additionally, free cash flow for the quarter was $2.2 billion.
Iron ore has been the key EBITDA and cash flow driver for Vale. However, the company is also investing in copper and nickel projects. With demand for these base metals increasing, Vale is positioned to benefit in the coming years.
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.
