Quality is king on the ASX again

When quality is cheap, it's usually a golden opportunity

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Back in January 2012, I wrote this article, suggesting that quality blue chip stocks were unfairly depressed, and looked at ten stocks that had taken big falls over the previous 52 weeks.

Back then I suggested that investors selling Woolworths Limited (ASX: WOW) and CSL Limited (ASX: CSL) might be mad.

Just over four months later, the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) has risen 2.2%. Had you started a portfolio of these stocks that day, your return would be over 7%. It would be a nice return above the market, while holding some quality and fairly low risk stocks.

That doesn't include dividends (some fully franked), that all of these companies have paid out in recent months. To be fair, neither does the index, but these companies are likely to have paid more than the average ASX 200 dividend yield.

Code Company Price then Price Now Change (%)
ANZ Australia and New Zealand Banking Group (ASX: ANZ) $20.87 $23.17 11.0%
BHP BHP Billiton Limited (ASX: BHP) $37.14 $34.79 -6.3%
CPU Computershare Limited (ASX: CPU) $7.75 $8.42 8.6%
CSL CSL Limited (ASX: CSL) $30.62 $37.23 21.6%
ORG Origin Energy Limited (ASX: ORG) $13.57 $13.14 -3.2%
QBE QBE Insurance Group Limited (ASX: QBE) $11.64 $13.34 14.6%
SHL Sonic Healthcare Limited (ASX: SHL) $11.35 $12.44 9.6%
WBC Westpac Banking Corporation (ASX: WBC) $20.63 $22.75 10.3%
WOR Worleyparsons Limited (ASX: WOR) $27.51 $26.48 -3.7%
WOW Woolworths Limited (ASX: WOW) $24.73 $26.71 8.0%
Average 7.1%
S&P/ASX 200 Index 2.2%

Source: Google Finance

Winners and Losers

The big winners since January have been ANZ, CSL, QBE and Westpac, all up by more than 10%. BHP, Origin Energy and Worleyparsons were the underperformers. Given those three are all resources or energy related stocks, this is reflecting the market's concerns about these sectors.

Companies such as Computershare, CSL and QBE have benefited from rising optimism and a falling Australian dollar, as much of their earnings comes from offshore. I suspect all the rising stocks have benefited as the market realised they had been oversold.

Despite Woolworths' issues such as price deflation, weak consumer sentiment and competition with both Coles, owned by Wesfarmers Limited (ASX: WES) and Metcash Limited (ASX: MTS), the company's shares are still up by 8%.

The banks, ANZ and Westpac continue to perform, recently posting billion dollar profits for the last six months.

The Foolish bottom line

Given the recent volatility, investors may yet again get the chance to pick up quality stocks at unreasonably low prices.

We aren't yet in a state of maximum pessimism or panic, with the market less jumpy than during the worst of 2008 and 2009, but market falls may well present investors with some golden buying opportunities.

If you're looking in the market for some high yielding ASX shares, look no further than "Secure Your Future with 3 Rock-Solid Dividend Stocks". In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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Motley Fool contributor Mike King owns shares in BHP, QBE, CSL and Woolworths. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).

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