Brambles Limited and Rio Tinto Limited: 2 core stocks for your portfolio

It's important to get the building blocks firmly in place to build long-term wealth.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Building a rock solid portfolio is just like building a house – it begins with the foundations you lay. If you don't lay solid foundations before you build your house, you run the risk of the building crumbling – your portfolio is no different!

For most investors, laying a solid foundation for their portfolio involves allocating the majority of their portfolio to solid blue-chip dividend-paying stocks. In general, this is a sensible, low-risk strategy. The only time is becomes high risk is if the blue-chips happen to be overvalued!

The following two blue-chip stocks are widely owned and at current prices look like appealing foundation stocks.

Brambles Limited (ASX: BXB) has a very wide customer base which is spread across multiple regions and industries – this creates a very defensive revenue base. The economics of Brambles' business also requires a huge upfront investment to achieve economies of scale – this is wonderful position for an entrenched leader like Brambles to be in, as it dissuades competitors from entry.

With the stock trading on a FY 2015 forecast price-to-earnings (PE) ratio of 20 and a yield of 3.1%, it isn't cheap, but given its quality it looks reasonably priced for long-term investors seeking 'foundation' stocks.

Rio Tinto Limited (ASX: RIO) is one of the world's largest miners with a market capitalisation of $122 billion. Rio is a good reminder to investors that even blue-chip stocks don't always make good investments. Investors who purchased at the top of the resource boom in 2008 at $150 per share are still very much underwater at today's price of $65.80. Despite the share price decline however, Rio remains one of the lowest cost producers – this is an important competitive advantage.

The stock is trading on a forecast FY 2015 PE of 11.4, a fully franked yield of 3.5% and with the resource bubble popped, this point in the cycle would appear a reasonable entry point for long-term investors.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »