Blue chip shares should form the foundation of all ASX investors’ diversified portfolios… Or so we’re told. Imagine if you owned two ‘blue chip’ bank and mining shares in your portfolio a year ago. Just look at those share price returns: BHP Billiton Limited (ASX: BHP) – down 49% Commonwealth Bank of Australia (ASX: CBA) – down 19% Rio Tinto Limited (ASX: RIO) – down 33% National Australia Bank Ltd. (ASX: NAB) – down 32% If that were your foundation a year ago, I’d be getting on the blower to your advisor, as soon as possible. ASX 10,000 here…
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Blue chip shares should form the foundation of all ASX investors’ diversified portfolios…
Or so we’re told.
Imagine if you owned two ‘blue chip’ bank and mining shares in your portfolio a year ago.
Just look at those share price returns:
- BHP Billiton Limited (ASX: BHP) – down 49%
- Commonwealth Bank of Australia (ASX: CBA) – down 19%
- Rio Tinto Limited (ASX: RIO) – down 33%
- National Australia Bank Ltd. (ASX: NAB) – down 32%
If that were your foundation a year ago, I’d be getting on the blower to your advisor, as soon as possible.
ASX 10,000 here we come
You see, a year ago, pundits were making all kinds of crazy forecasts. They thought bank and mining shares would take the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) above the 6,000 point mark to beyond who knows what.
Hindsight’s great, of course. But you needn’t have a genie in a bottle to recognise the banks and miners were overpriced and headed for a rough patch. In fact, more pain could be in store.
Indeed, few shares in the S&P/ASX 100 (ASX: Index: ^AXTO) (ASX: XTO) should be considered ‘blue chip’, in my opinion. A ‘blue chip’ share is not just big. It weathers downturns. It’s high-quality, and has widely accepted products.
3 healthy blue-chip shares for every ASX investor
In my opinion, the following three ASX shares are deserving of a blue chip label and would make a worthwhile addition to portfolios, at the right price.
- Cochlear Limited (ASX: COH) – if you know someone with hearing loss you’d know Cochlear serves the highest-quality products to a global marketplace. This $6 billion healthcare business continues to go from strength to strength.
- ResMed Inc. (CHESS) (ASX: RMD) – is the Cochlear equivalent of the sleep apnea and related respiratory disorder market. The company’s Continuous Positive Airway Pressure (CPAP) and Automatic Positive Airway Pressure (APAP) devices are sold globally.
- CSL Limited (ASX: CSL) – arguably the ASX’s best blue-chip business over the past decade, CSL is the quintessential defensive company. The $47 billion biopharmaceutical business is a leading blood plasma product developer and manufacturer.
A big company does not equal a good investment. Indeed, against the backdrop of a slowing economy and falling commodity prices, shareholders in some of the ASX’s biggest names should be actively assessing their exposure to all companies.
While the above three companies are certainly worthy of a spot on watch lists, personally I would wait for lower share prices before hitting the buy button.
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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.