MENU

3 blue-chips I’d buy with $5,000: AMP Limited, Transurban Group and Insurance Australia Group Ltd

As investors, it’s sometimes difficult to ignore short-term fluctuations and instead focus on the long-term prospects of a company. Indeed, all share prices fluctuate – some more than others – but not all companies turn out to be great investments in the long run.

With that in mind, here are three blue-chips that could prove to be strong long-term performers despite their share prices having been volatile of late. As such, they could be worth buying the next time you have a spare $5,000 lying around…

AMP Limited

Shares in AMP Limited (ASX: AMP) have performed well during the course of 2014, delivering capital gains of 26%. However, that doesn’t mean that they’re drastically overpriced. Certainly, a P/E ratio of 17.8 is above the ASX’s 15.7, but when AMP’s strong earnings growth potential is taken into account, it’s a different story.

AMP’s bottom-line is due to rise by 55% in the current year and by a further 9.5% next year. This puts shares in the company on a price to earnings growth (PEG) ratio of just 0.6. Furthermore, with a yield of 4.4% (70% franked), AMP offers income potential as well as growth at a reasonable price.

Transurban Group

Although shares in Transurban Group (ASX: TCL) are up just 0.5% over the last three months, they have been up by as much as 8% during the period before falling back in recent weeks. That’s despite recently releasing encouraging results that showed a year-on-year increase of 44% in net profit.

Looking ahead, Transurban is forecast to grow earnings at an annualised rate of 28.3% over the next two years. This means that, while its P/E of 39.5 is very high, its PEG ratio of 1.4 seems much more appealing – especially when the ASX has a PEG ratio of 1.8. With a partially franked yield of 4.8%, Transurban could prove to be a long-term winner.

Insurance Australia Group

After a disappointing start to 2014, Insurance Australia Group Ltd (ASX: IAG) has delivered share price gains of 15% in the last six months alone. However, there could be much more to come in the future.

That’s because IAG offers a fat, fully franked yield of 6.4% and trades on a P/E ratio of just 11.1. This shows that there is considerable scope for an upward revision to IAG’s current rating, especially when the ASX has a P/E of 15.7. The income potential from the stock is also impressive.

Although earnings growth is set to stall over the short term, IAG could see its share price bid up by value investors and income investors alike. As such, it could prove to be an attractive long-term play.

Bonus Fourth Stock

However, there is a fourth stock that also could be worth adding to your portfolio.

Indeed, it's what we think could be the 'story stock' of 2014!

Get The Motley Fool's #1 pick now in our newly updated investment report. It's yours FREE. Simply click here for your copy of "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Peter Stephens does not own shares in any of the companies 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.