MENU

3 blue chips for your portfolio

Many investors may be looking at the share prices of the banks and wondering where on earth they are going to park their funds as their term deposits mature. Many face putting up very low interest rates, or having to make a decision to invest elsewhere.

With bank share prices looking extremely expensive despite the fully franked dividends, investors are desperately seeking safe, reliable businesses to invest in.

Here’s three companies that might not look cheap now, but could leave the S&P/ASX 200 index (Index:^AXJO) (ASX:XJO) in their dust over the next five to ten years.

CSL Limited (ASX:CSL) is currently trading on a trailing P/E ratio of 24.1, but could see growth of around 20% per annum over the next few years. New products developed from blood plasma to treat a host of diseases may be coming to add to the company’s existing lineup, along with more sales into developing countries could see sales and profits rise. Add in the company’s ongoing share buybacks, and existing shares could be worth multiples of the current price.

Cochlear Limited (ASX:COH) is reportedly facing increased competition from revitalised competitors, as well as Chinese startups. But don’t let that fool you. Cochlear develops premium hearing devices and has more products in the pipeline. When it comes to people’s health, quality is king, and Cochlear is likely to profit from rising awareness of its products globally.

Telstra Corporation (ASX:TLS) may not be able to grow its mobile or broadband business too much further in Australia. It already has dominant positions in both, and Australia’s market is fairly small and growing at a slow rate. But its smaller, unsung divisions such as cloud computing, network applications and data services could see massive growth in the years ahead. Shareholders could see Telstra’s legendary dividend significantly higher in ten years’ time.

Foolish takeaway

While the banks are unlikely to grow significantly from here, without a big increase in credit growth, these three may be better options for those looking for solid, blue chip companies for their portfolio.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool writer/analyst Mike King owns shares in CSL, Cochlear and Telstra.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.