For investors with a small portfolio, there is a temptation to buy low-price stocks to add diversification. Indeed, the penny stocks space (stocks valued under $5) provides a greater likelihood of finding relatively high-return options. Of course, many of these speculative names won’t pan out. However, there are dozens of stocks under $20 that are fundamentally strong and can be potential value creators for long-term investors.
As a matter of fact, there are plenty of blue-chip stocks that trade under $20. Thus, my focus in this article is limited to some attractively-valued stocks that have significant positive industry tailwinds. Irrespective of the broader market trends, I believe that these stocks can double over the next 12 months.
One company on this list I would categorize as a growth stock, but my focus is on blue-chip stocks. Given macroeconomic uncertainties, I would grab undervalued blue-chip stocks that can potentially deliver returns similar to growth stocks.
Let’s discuss the reasons to be bullish on these stocks under $20.
Marathon Digital (MARA)
Marathon Digital (NASDAQ:MARA) is among the speculative growth stocks that have shot higher this year. In fact, MARA stock has skyrocketed 300% on a year-to-date basis.
That said, I believe that MARA stock can double from current levels over the next 12 months. The key driver of such a move would be a continued surge in the value of Bitcoin (BTC-USD). A Bitcoin rally is underway, and with Bitcoin halving due in 2024, the rally can potentially heat up from here.
Marathon has pursued aggressive expansion in terms of its Bitcoin mining capacity. As of May, the company reported operational hash rate of 15.2EH/s. The company has since guided to increase capacity to 23EH/s by June. This will translate into significant growth in the number of Bitcoin mined. Thus, if the price of Bitcoin rises, this is a company with significant upside exposure to this trend.
It’s worth noting that Marathon has a strong balance sheet. With a strong position in both cash and digital assets, the company’s financial flexibility is high. Thus, if Bitcoin remains in an uptrend, I expect further capacity expansion to be announced in the second half of 2023 and on an ongoing basis. At the same time, the expansion of EBITDA margins and additional cash flow growth is likely to trigger positive stock price action for MARA stock over the medium-term.
AT&T (T)
AT&T (NYSE:T) is a massively undervalued company, considering its forward price-earnings ratio of 6.6-times. This is one of the reasons I believe that T stock will deliver 100% total returns over the next 12 months. Currently, this telecom company also offers a dividend yield around 7%, providing a floor underneath its stock price, assuming dividend investors continue to add on weakness moving forward.
Recently, President Biden announced a $42 billion plan to give every American access to high-speed internet by 2030. I believe that AT&T is likely to be a beneficiary of this plan. It’s worth noting that the company has invested $140 billion over the last five years to boost its wireless and wireline networks. Besides the potential benefit from Biden’s plan, AT&T is best-positioned to benefit from the wider adoption of 5G.
Another reason to be bullish on AT&T is the company’s ongoing deleveraging strategy. After the de-merger of its media division, the company reduced its net debt by $24 billion. Additionally, AT&T is looking to sell its cybersecurity division in a bid to further bolster its balance sheet. As the company’s credit metrics improve, its stock is likely to trend higher.
It’s also worth noting that for Q1 2023, AT&T reported operating cash flow of $6.7 billion. With annualized operating cash flow potential of $27 billion, there is plenty of flexibility and headroom for additional capital investments and dividend hikes over time.
Panasonic Holdings (PCRFY)
Panasonic Holdings (OTCMKTS:PCRFY) is another company that’s surged this year. In fact, PCRFY stock has already surged by 46% for the year. That said, I’m betting on sustained upside with PCRFY stock, given it’s still trading at an attractive forward price-earnings ratio of 11.2-times. Additionally, the company’s dividend yield of 1.8% is also attractive.
A key reason to be bullish on Panasonic is the company’s aggressive growth plans. The company has one EV battery plant in the U.S. and a second is under construction. Additionally, Panasonic has further finalized Oklahoma as the third plant location. The company is also looking to boost production at Tesla’s (NASDAQ:TSLA) Nevada gigafactory. With these expansion plans, it’s likely that revenue growth will be healthy over the medium- to long-term.
Panasonic is also a company betting big on innovation, working on solid-state batteries and other key initiatives. Further, Panasonic aims to increase its battery density by 20% by 2030. This will help in making lighter and smaller batteries, driving revenue and cash flow growth over time.
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.
