When investors look for relatively high returns in quick time, the focus is on high-growth stocks. Blue-chip stocks are generally associated with stable returns over time. However, there are exceptions, and some attractive blue-chip stocks to buy can surprise by outperforming growth stocks during a specific timeframe.
Nvidia (NASDAQ:NVDA) has been among the hot blue-chip stocks and has skyrocketed by 73% year-to-date. Further, over the last 12 months, the stock has surged by 257%. My focus in this column is on three non-technology blue-chip stocks to buy that can surprise on the upside within the next 24 months.
In my view, these blue-chip ideas trade at a significant valuation gap. It does not take time for the markets to shift focus, and once these stocks are in the limelight, the upside is likely to be meaningful. Let’s discuss the reasons to be bullish on these blue-chip stories.
Barrick Gold (GOLD)
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Sentiments remain bullish for gold, with the metal surging above $2,100 an ounce. Factors of macroeconomic headwinds, inflation, geopolitical tensions and possible expansionary policies will ensure that gold continues to trend higher.
Among blue-chip gold mining stocks to buy, Barrick Gold (NYSE:GOLD) looks attractive. It’s worth noting that GOLD stock has remained sideways in the last 12 months. A big breakout on the upside is imminent in the coming quarters.
As an overview, Barrick Gold has a strong portfolio of six tier-one assets globally. Further, the company has a strategic copper asset. It’s also worth noting that the company has provided steady gold and copper production upside through 2027. Higher realized price and production upside will translate into robust free cash flows.
For 2023, Barrick Gold reported operating cash flow of $3.7 billion. It’s likely that OCF will be in the range of $4 to $4.5 billion for this year. Besides flexibility for higher capital investments, I also expect healthy dividend growth.
AT&T (T)
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AT&T (NYSE:T) has been depressed for an extended period. T stock looks significantly undervalued at a forward price-earnings ratio of 7.7. Further, the stock offers a dividend yield of 6.54%. With business developments remaining positive, it’s a matter of time before the stock blasts higher.
If we look at the financials for 2023, the most important number is its free cash flow of $16.8 billion. Further, for this year, the company guided for FCF of $17 to $18 billion. That provides ample headroom for dividends and deleveraging. AT&T has continued to reduce its debt, and as credit metrics improve, I expect the stock to trend higher.
It’s worth noting that during 2023, the company reported continued growth in phone and fiber subscribers. In the last few years, AT&T has made some big investments toward boosting its wireless and wireline network. Currently, its 5G (low-band spectrum) reaches 295 million people in the U.S. I expect steady growth in the subscriber base that will translate into upside in cash flows.
Ford (F)
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Ford (NYSE:F) is another blue-chip stock to buy that has remained subdued in the last 12 months. At a forward price-earnings ratio of 6.7, the stock looks deeply undervalued. Backed by impressive sales numbers, I believe F stock will likely surge higher in the coming quarters.
For the first two months of 2024, Ford delivered 11,042 EVs in the United States, which was higher by 25.9% on a year-on-year basis. Further, hybrid vehicle sales growth for the same period was 36.7% at 23,202. Ford’s transformation towards hybrid and EVs is, therefore, yielding results. As sales growth accelerates, I expect F stock to trend higher.
It’s worth noting that for the year, Ford has guided for $6 to $7 billion in adjusted free cash flows. This is after a potential capital expenditure of $8 to $9.5 billion. Therefore, the outlook is positive, and Ford’s financial flexibility will continue to improve.
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.
Blue-Chip Stocks
