Aside from a sharp fall between May and June and another in December, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) experienced little volatility in 2013 with investors recognising some fantastic gains. However, while investors’ hopes were high for another strong year in 2014, January brought disappointment and even fear of what is to come.
Global markets have been rocked by the tapering of the US Federal Reserve’s bond-buying program, declining Chinese manufacturing activity and shaky investor confidence. One of the best ways to stabilise your portfolio is to ensure it maintains a strong foundation and is properly diversified.
With the index down a further 70 points or 1.4% today, investors could use this as an opportunity to stock up on some of Australia’s blue chips to solidify their portfolio. Here are three you could consider:
BHP Billiton Limited (ASX: BHP): Unlike many of Australia’s other blue chip stocks, BHP heavily underperformed the index in 2013. However, a number of analysts have pegged it to deliver much stronger returns in 2014. The mining giant looks set to return to profitability this year as it continues to focus on reducing operating costs and increasing productivity, while it is also heavily ramping up its production of key commodities such as iron ore. The company is also pegged to increase its shareholder returns which could see a share buyback program implemented as well as an increase in dividend distributions. Since the beginning of the year, shares have fallen 5.7% to their current price of $35.81.
Coca-Cola Amatil Ltd (ASX: CCL): The manufacturer and distributor of some of the world’s most popular brands also had a year to forget in 2013 as pricing pressures mounted from rival Schweppes and grocery giants Woolworths Limited (ASX: WOW) and Wesfarmers Limited (ASX: WES). However, the company has enormous growth prospects in Indonesia, while it has also re-entered the $1 billion a year beer market, which should drive earnings for years to come. After finishing last year trading at $12.03 per share, it has fallen a further 4.2% to $11.52.
Telstra Corporation Ltd (ASX: TLS): The telecommunications giant has had a fantastic run over the last three years and, despite its status as one of Australia’s largest corporations, still has plenty of growth ahead of it. More and more customers are switching from the services of rivals to Telstra, and the company should continue to benefit from an increased usage of the internet and smartphones. Shares are trading at $5.10 which is 2.8% below where it traded at year’s end.
After a stellar 2013, investors are being reminded of the risks involved with investing in the share market. While the blue chips might not have as great growth prospects as many other listed companies, they certainly help to stabilise your portfolio when things get rough.
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*Returns as of February 15th 2021
Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.
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