Why it’s time to get bullish on AMP Limited and Origin Energy Limited

When top stocks are on sale, it’s time to go shopping!

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With substantial market-leading positions and market capitalisations of $14.2 billion and $15.7 billion respectively, AMP Limited (ASX: AMP) and Origin Energy Limited (ASX: ORG) can both well-and-truly be considered blue-chip stocks.

For investors looking to build a portfolio of rock-solid large companies there are a number of reasons to be bullish on these two stocks right now.

Defensive and maintainable earnings

AMP operates in the insurance and financial services sectors. With the tailwind of 9% compulsory superannuation contributions and the company offering services which will never cease to be required by consumers, investors in AMP know that their company won’t find itself in structural decline.

In a similar way to the continued demand for financial advice and services, shareholders in Origin are buying in to a company that is a vertically integrated supplier of essential energy products and services. Origin’s soon to be completed, massive Australia Pacific LNG Project adds to its appeal as this should help the firm defend and maintain market share and importantly also grow its earnings in the coming years.

Market Leadership

While AMP and Origin are not without their fair share of competitors such as Commonwealth Bank of Australia’s (ASX: CBA) expansive branch network of financial planners and AGL Energy Ltd’s (ASX: AGK) significant generation capacity and retail business respectively, they do still both hold large, entrenched market positions from which they would be difficult to dislodge.

Valuation

AMP is forecast to earn 36.4 cents per share (cps) in financial year (FY) 2015 and pay dividends totalling 27.2 cps. With the stock currently trading at $4.90 this implies a price-to-earnings (PE) ratio of 13.5 and yield of 5.5%.

Origin is forecast in FY 2015 to produce earnings per share of 82.2 cps and dividends of 50 cps. At a current share price of $14.25 this implies a forward PE of 17.3 and forward yield of 3.5%.

Foolish takeaway

Given the blue-chip, high quality nature of these two firms they are both worth consideration by investors looking to build rock-solid portfolios. Based on consensus analyst forecasts neither company looks excessively priced at present, so now could be a good time to get bullish.

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Motley Fool contributor Tim McArthur owns shares in Origin Energy Ltd.

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