Blue-chips stocks are a vital element of any portfolio due to their defensive natures, brand recognition and the steady flow of income they provide, they also act as security for your portfolio against market volatility.
When investors think of blue-chip stocks, they think of companies like the Commonwealth Bank of Australia (ASX: CBA) and its banking peers, as well as the supermarket giants Woolworths Limited (ASX: WOW) or Wesfarmers Ltd (ASX: WES). However, after rallying strongly over the last 18 months or so, these companies now appear to be overpriced and stand little chance of delivering market-beating returns in the long run.
So what blue-chips deserve a place in your portfolio today? Which companies will provide your portfolio with that ever-important element of safety, whilst also standing a good chance at giving you decent returns in the long-run? Three fantastic options come to my mind:
Coca-Cola Amatil Ltd (ASX: CCL): It was a year to forget for shareholders of the beverage manufacturer and distributor in 2013, as pressures mounted from the supermarkets and its primary competitor Schweppes. Its struggling SPC Ardmona business also helped drive CCL's profit down substantially for the year. These short-term issues have created a fantastic opportunity for long-term focused investors to take advantage of its enormous growth potential in Indonesia. With shares currently trading 27% below their 52-week high at just $11.33, now is an excellent time to pick up a position.
Telstra Corporation Ltd (ASX: TLS): Unlike Coca-Cola Amatil, Telstra had yet another outstanding year in 2013. Although its shares are no longer in the bargain territory they were three years ago, the telco still has an outstanding amount of growth ahead of it as individuals and businesses continue to rely more and more on smartphones and broadband. What's more, the company increased its dividend for the first time in eight years, taking its fully franked yield to 5.6%.
Amcor Limited (ASX: AMC): The global packaging business recently demerged from its Australasian and Packaging Distribution group Orora Limited (ASX: ORA), which will allow the company to focus solely on operations in emerging economies. The company has delivered fantastic returns over the last five years and as the Australian dollar continues to weaken, those returns should continue to grow. With a market capitalisation of $12.4 billion and a yield of 4%, Amcor at the very least deserves a spot on your watchlist.
