Growth stocks sound exciting as they represent high-growth companies that could create immense value. Penny stocks are similar as they have a high degree of speculation. Blue-chip stocks are essential in a portfolio.
Some of the best blue-chip stocks can deliver returns that might best growth stock returns. Blue-chip stocks are like the backbone of a portfolio, they lower the overall portfolio risk and provide steady cash flows as dividends.
I believe that over the next two to three years, total returns from these stocks will beat index returns. The valuation gap is therefore a good opportunity for exposure.
Newmont Corporation (NEM)
Economists at Bank of America believe that there will be 152 interest rate cuts from global central banks this year. With renewed expansionary policies, it’s likely that gold will be among the top performing asset classes.
A good proxy for gold investment is exposure to gold mining stocks and Newmont Corporation (NYSE:NEM) stock is attractive among the best blue-chip stocks.
Newmont has a quality asset base with 96.1 million ounces of gold, 15 billion pounds of copper, and 600 million ounces of silver reserves. The recent acquisition of Newcrest Mining will further add to the reserves base. This provides clear production and cash flow visibility.
Further, Newmont has an investment grade balance sheet with a liquidity buffer of $6.2 billion. As cash flows swell on the back of higher realized gold price, the company will be positioned to increase investments. I expect healthy dividend growth this year. With NEM stock in a consolidation zone in the last six months, a breakout on the upside seems imminent.
Lockheed Martin (LMT)
In 2022, global defense expenditure touched record highs of $2.24 trillion. I believe that defense spending will continue to increase globally considering multiple points of geopolitical tensions. Lockheed Martin (NYSE:LMT) is a quality blue-chip stock from the defense sector.
The stock with a 2.78% dividend yield has an appealing forward price-earnings ratio of 16.7. With LMT stock being sideways for the last 12 months, it’s a good entry point for robust total returns in the coming quarters.
As of Q3 2023, Lockheed reported an order backlog of $156 billion. The backlog has been swelling and sets the stage for accelerated revenue growth in the coming quarters. For 2023, Lockheed has also guided for free cash flow of $6.2 billion. This provides flexibility for dividends and investment in new defense technology.
Lockheed is also focusing on international collaborations. This is one factor that’s likely to translate into higher revenue from global markets. Overall, LMT stock is trading at a valuation gap and it’s an excellent opportunity to accumulate this blue-chip.
Pfizer (PFE)
The global bio-pharmaceutical sector has been largely ignored in a post-pandemic world. This has translated into undervalued in some blue-chip stocks. Pfizer (NYSE:PFE) stock looks interesting after a deep correction of 42% in the last 12 months. The 5.84% dividend yield stock is primed for growth this year with a firm foundation for future expansion.
Last month, Pfizer provided an initial guidance for 2024. The company expects $60 billion (mid-range) in revenue, which would imply a year-on-year growth of 9%. I expect steady growth to sustain on the back of an attractive product pipeline.
By 2030, Pfizer expects $20 billion in incremental revenue from new molecular entities. Further, by the end of the decade, the Company is targeting $25 billion in incremental revenue from new business deals. With these long-term positives, PFE stock is among the best blue-chip stocks to buy now.
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.
