3 stocks to buy after the crash: Telstra Corporation Ltd, Rio Tinto Limited and JB Hi-Fi Limited

Buying these 3 stocks appears to be a shrewd move: Telstra Corporation Ltd (ASX:TLS), Rio Tinto Limited (ASX:RIO) and JB Hi-Fi Limited (ASX:JBH).

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With the ASX falling by 8% in the last three months, buying shares may feel like the last thing that investors should be doing right now. After all, with the outlook for commodity markets being uncertain, further drops in the value of the ASX would hardly be a surprise.

And, while fear remains the dominant emotion among investors, buying high quality companies at discounted prices could be a logical move. That's because, with wider margins of safety on offer, they could post excellent total returns in the coming years.

For example, Telstra Corporation Ltd (ASX: TLS) has a bright future as a business, with it focusing on offering a wider range of products and service in the coming years. Notably, it is expanding into e-healthcare and its aim is to provide a better connected health service over the medium to long term, which should allow location to not be a dominant factor in the quality of care received by patients. And, with an ageing population, Telstra's profitability could continue to rise at the 8%+ per annum rate that is being forecast over the next two financial years.

Furthermore, Telstra remains a very appealing defensive play, with it having a beta of just 0.5. This means that its shares should move by roughly half as much as the wider index, which indicates that during a bear market they could hold their value a lot better than the majority of Telstra's index peers.

Rio Tinto Limited (ASX: RIO), meanwhile, trades at a discount to the ASX, with it having a price to earnings (P/E) ratio of 14.1 versus 15.3 for the wider index. And, while the price of iron ore could fall further as demand remains weak, its bottom line is due to hold up reasonably well next year, with a fall of just 3.4% currently being forecast.

This fall, though, is not sufficient to put Rio Tinto's dividend under severe pressure. The company is still set to cover it with profit, with its dividend coverage ratio expected to be 1.1 times next year, which makes its dividend yield of 6.2% appear to be relatively sustainable. With interest rates due to slide, such an impressive yield could stimulate investor interest in Rio Tinto and push its share price northwards after its 16% fall year-to-date.

Similarly, JB Hi-Fi Limited's (ASX: JBH) rise in dividends per share of 31% per annum during the last decade marks it out as a very enticing income play. Declining consumer confidence is likely to reduce this rate in future years, but the seller of household electronic appliances is still forecast to increase shareholder payouts at an annualised rate of 4.7% during the next two years. This puts it on a forward yield of 5.1% versus 4.7% for the ASX and 4.8% for the wider retailing sector.

Despite rising by 22% since the turn of the year, shares in JB Hi-Fi trade on a P/E ratio of just 13.9. Certainly, JB Hi-Fi is not the most stable of stocks, with it having a beta of 1.3 and being likely to be relatively volatile moving forward. But, with a track record of increasing its bottom line by 21% per annum during the last 10 years, it may prove to be a more stable business than the market is currently anticipating.

Motley Fool contributor Peter Stephens owns shares in Rio Tinto. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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