MENU

2 blue-chip stocks up over 5% in the past month that you should follow

Over the last month the S&P ASX 200 Index (ASX: ^XJO) has sedately moved sideways, down about 1.2%. Tempered by the Federal budget, further iron ore price falls and some consumer sentiment weakness, June has been less than thrilling, yet there are two blue-chip stocks that have risen more than 5% over the same time.

Here’s what’s driving them and why investors should keep a close watch on where they could be going.

Qantas Airways Limited (ASX: QAN)    (up 5.6% since 16 May)

The iconic “Flying Kangaroo” has made a “cease-fire” with Virgin Australia Holdings Ltd (ASX: VAH) to halt adding flight capacity in a pricing war. Actually, Qantas may also take it the other way, reducing capacity that could lift prices.

It is proceeding with its transformation program that projects about $2 billion in savings, of which it expects to achieve $800 million by FY 2015. By third quarter FY 2015, it plans to have scaled down its jet fleet to just two types of more fuel-efficient planes to cut fuel and maintenance costs.

qantas stock chart

 

 

 

 

 

 

 

 

 

 

 

Source: incrediblecharts.com.au

— Outlook     The growth prospects may be unclear over the next few years, but the company has about $3 billion in cash and undrawn bank facilities that will relieve some of the financial stress in the transformation.

Some analyst forecasts are now projecting a bigger earnings per share loss for FY 2014 and a smaller loss for FY 2015. If it could turn to a net profit from there, then it may be worthwhile for investors. Turnarounds can have profitable returns, but the story needs to be watched closely. For now the watchlist will do for this stock until full year results come out.

Oil Search Limited (ASX: OSH)      (up 6.7% since 16 May)

LNG exports from the energy producer’s jointly owned PNG LNG project started shipping in late May and its share price rallied 6.7% in the last 30 days. It had some informal talks with Woodside Petroleum Limited (ASX: WPL) recently, but the nature of the discussions hasn’t been revealed. Woodside might be looking at what opportunities may be had with Oil Search after it decided not to get involved in the Leviathan LNG project near Israel.

oil search stock chart

 

 

 

 

 

 

 

 

 

 

Source: incrediblecharts.com.au

— Outlook     Although Oil Search has a 36 price/earnings ratio, earnings are expected to move upward in a step-like manner as the PNG LNG project ramps up to full production capacity. Further expansion could increase production output by as much as four times. The share price could get punished if disappointing announcements come out, so it may be better to add deftly to a position on price weakness.

How to invest like a billionaire - and 2 new stock picks for you

I prefer Oil Search over Qantas just from sheer growth potential, but would Warren Buffett, one of the world's all-time most successful investors, be shaking his head at this one?

Now you can find out the investing secrets of this $60 BILLION man- "The Oracle of Omaha". Plus, you'll get two brand new ASX ideas!

Get your copy of The Motley Fool's brand-new report "The Wisdom of Warren Buffett -- Plus 2 ASX Shares Buffett Could Love"

The Motley Fool has helped investors find great stocks for many years. We look for high quality companies showing value and income potential the market may not have caught onto or ignored.

See for yourself in this report- FREE when you click here.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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.