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

Regardless of an investor’s age or risk tolerance, a portfolio is incomplete without blue-chip stocks. These stable companies offer strong fundamentals and robust dividend yields. However, the high share price of many blue chips can act as a deterrent, especially for small investors. The good news is that not all blue chips are expensive. Today I am sharing the best blue chip stocks under $20 to buy right now.

Inflation, geopolitical tensions and weakening global growth have been major headwinds for equities, leading to a high degree of uncertainty. Yet this has also translated into attractive valuations among many of the top stocks, including blue chips.

For the best blue-chip stocks under $20, I focus on those that trade with a valuation gap, making them more likely to outperform over the next 12-24 months.

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VALLEY

Valley

$12.77

F

Ford

$13.06

GOLD

Barrick Gold

$14.34

Vale (VALE)

the Vale logo displayed on a mobile phone with the company’s webpage in the background

Source: rafapress/Shutterstock.com

At current valuations, Valley (NYSE:VALLEY) is among the best blue-chip stocks under $20 to consider. The Brazilian metals and mining company is trading at a forward price-to-earnings ratio of 4.9, which is below its five-year average of 6.4. Additionally, the stock offers an attractive dividend yield of 11.2%.

Vale is the second largest iron ore producer in the world. With iron ore prices near two-year lows, the company posted a year-over-year decline in net operating income and earnings per share in the third quarter. However, adjusted EPS of 98 cents was well ahead from the Zacks consensus estimate of 60 cents.

It should be noted that the company still managed to post adjusted EBITDA of $4 billion and free cash flow of $2.2 billion. The company paid $3.1 billion in dividends for the quarter and repurchased $686 million of its stock. With strong visibility on free cash flow, the company’s dividend is sustainable.

Another reason to love Vale is its focus on a wallet that support a low-carbon economy. This includes the production of nickel and copper, which are used in electric vehicle batteries and charging, and in solar power systems.

VALE is down around 9% so far in 2022, significantly outperforming the broader market. However, stocks look deeply undervalued and have the potential to double from current levels over the next year.

Ford (F)

Ford logo badge on car grill

Ford logo badge on car grill

Source: JuliusKielaitis / Shutterstock.com

Legacy automaker Ford (NYSE:F) is a stock investors should get excited about again as the company undergoes its transition to an electric vehicle powerhouse and the higher valuation that is likely to come with that designation. After falling 37% year-to-date, the stock is trading at a forward price-to-earnings ratio of 7.2. In comparison, You’re here (NASDAQ:TSLA) has a forward P/E of 42. Speaking of Tesla, Ford remains the second-largest American electric vehicle brand behind Tesla.

When declaring his third quarter resultsFord said it is on track to produce 600,000 electric vehicles by the end of 2023 and 2 million by 2026. Ford plans to expand its lineup of electric vehicles in the coming year with the release of the Mustang Mach-E and the F-150 Lightning.

In the third quarter, revenue rose 10% year over year to $39.4 billion. However, Ford reported a net loss of $827 million, partly due to investments in electric vehicles in China. These investments will likely bear fruit once deliveries to the region pick up.

Finally, the company reported adjusted free cash flow of $3.6 billion in the third quarter and ended the quarter with $32 billion in cash and cash equivalents, providing ample financial flexibility for aggressive investments in electric vehicles. .

Gold Barrick (GOLD)

How to play Barrick Gold Stock before today's gains

How to play Barrick Gold Stock before today’s gains

Source: Piotr Swat / Shutterstock.com

Precious metals were negatively impacted by the strength of the US dollar. I believe this presents a good opportunity to accumulate quality gold mining stocks like Barrick Gold (NYSE:GOLD). Stocks look very attractive after a 36% correction over the past six months.

One of the reasons I like Barrick Gold is its superior track record. At the end of the second quarter, the company reported cash and cash equivalents $5.8 billion. Moreover, with a net debt of only $636 million, the level of financial flexibility is high. Barrick also reported free cash flow of $562 million for the first half of 2022. Even with falling gold prices, the company’s balance sheet should be more than capable of supporting the dividend payment, which is yielding currently 5.3%.

In 2021, Barrick had proven and probable gold reserves of 69 million ounces and replaced 150% of its depleted gold mineral reserves. Production is expected to hold steady for years to come, continuing to give the company financial flexibility and making it one of the best blue chip titles under $20 to buy.

As of the date of publication, Faisal Humayun does not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Faisal Humayun is a senior research analyst with 12 years of experience in credit research, equity research and financial modeling. Faisal is the author of over 1,500 stock-specific articles focused on the technology, energy and materials sectors.

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