The 3 Best Blue-Chip Stocks Under $20 to Buy Now

28 thg 11, 202223:24 UTC

The best blue-chip stocks under $20 that look attractive for the long term may be hard to ferret out but are worth it.

Whether from a desire to find multi-bagger names among penny stocks or to have a diversified portfolio even with limited funds, it’s common for retail investors to seek low-priced stocks. Fortunately, low priced stocks do not always imply penny or purely speculative names.

Having blue-chip stocks in the portfolio ensures regular cash flows through dividends. Additionally, blue-chip stocks have a lower beta and I would ideally be overweight these stocks in uncertain market conditions.

It’s an added bonus to grab the best blue-chip stocks under $20 at an attractive valuation. It’s not uncommon that markets misprice stocks. These blue-chip stocks represent companies with strong fundamentals. It’s likely that these undervalued stocks will outperform the index returns in the next few years.

Let’s discuss the business and financials of these blue-chip stocks.

T	AT&T	$18.82
F	Ford Motor	$13.73
GOLD	Barrick Gold	$15.50

AT&T (T)

In October, AT&T (NYSE:T) stock touched lows of $14.50. On the back of strong quarterly results, T stock is already higher. However, at a forward price-earnings ratio of 7.3, the stock remains undervalued and among the best blue-chip stocks under $20.

It’s worth noting that AT&T has reported sustained growth in post-paid and fiber subscribers. This is one reason for the positive stock price action. Additionally, the company has also guided for free cash flow of $14 billion in 2022.

Dividends are therefore safe and AT&T will have headroom for deleveraging. The company has already reduced net debt by $25 billion for year-to-date 2022.

AT&T has also been pursuing cost savings. The company believes that higher average revenue per user coupled with cost efficiency will more than offset the inflationary impact. It’s therefore likely that EBITDA margin expansion will be seen. Particularly, if 5G adoption accelerates significantly in the U.S.

Ford Motor Company (F)

Ford Motor (NYSE:F) is another undervalued name among best blue-chip stocks under $20. At a forward price-earnings ratio of 7, the stock has upside potential.

It’s the company’s rapid portfolio transformation towards EVs that makes Ford attractive. Ford expects to increase EV production to 600,000 vehicles by late 2023. Further, the company aims to produce two million EVs annually by 2026. To achieve this target, the company’s EV segment growth must be at a CAGR of nearly 100% through 2026.

A key positive is that Ford reported a liquidity buffer of $49.2 billion as of Q3 2022. This provides flexibility for some big investments in the United States, Europe, and China. Ford has already been focusing on building a secure supply chain. This includes investment in EV battery plants.

Barrick Gold (GOLD)

Barrick Gold (NYSE:GOLD) looks attractive after trading marginally lower for year-to-date 2022. With inflation easing on a relative basis, gold has trended higher from 2022 lows. With geopolitical tensions and growth uncertainty, I remain bullish on the precious metal. A good way for exposure to gold is through gold mining stocks.

The first point to note is that even with a depressed gold price, Barrick Gold reported operating cash flow of $758 million for Q3 2022. Strong cash flows are therefore likely to sustain and this will ensure dividends and investment towards stable production. Barrick Gold also reported a strong cash buffer of $5.2 billion as of Q3.

Barrick Gold reported proven and probable mineral reserves of 69 million ounces as of December 2021. On a year-on-year basis, the company’s reserve replacement was 150%. Robust reserves and reserve replacement ensures clear cash flow visibility.

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.