Why I think you should buy these 2 bargain blue-chip shares


In the last 30 days the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has had many ups and downs, ending the period just about flat.

Whilst the index didn’t really go anywhere, the same cannot be said for some blue-ship shares. Two of my favourites have had a particularly bad 30 days, putting them at what I believe to be an attractive entry price for a long-term investment.

Flight Centre Travel Group Ltd (ASX: FLT)

It really has been a tale of two travel shares this month. In one corner you’ve got Webjet Limited (ASX: WEB) which released an upbeat market update sending its share price up by 7%. In the other corner you’ve got Flight Centre releasing a market update advising of a significant downgrade to its forecast profit guidance. This update has been the catalyst to send its share price plummeting by 17% in the last 30 days. Management has blamed the Australian election, the Brexit vote, and the Zika virus as being the key reasons for the soft demand and expected 2% to 5% drop in full year profit. I believe these headwinds are temporary and that long-term buy and hold investors could pick up a bargain today at the current price.

Harvey Norman Holdings Limited (ASX: HVN)

In the last month shares of Harvey Norman have dropped by almost 7%. Its rival JB Hi-Fi Limited (ASX: JBH) was not far behind with a 4.3% drop also. The drop may be related to the trading update released by Beacon Lighting Group Ltd (ASX: BLX) which caused this retailer’s shares to drop a massive 21%. Beacon Lighting advised that sales in the last couple of months have not met management’s expectations. Harvey Norman has been thriving on the back of a housing market boom, so any sign of weakness in the industry is worrying for investors. But as the company’s product assortment is far more diverse than that of Beacon Lighting, I expect Harvey Norman is performing well. Especially when you factor in the vacated market share the demise of Dick Smith Electronics has left up for grabs.

Foolish takeaway

I believe that both of these blue chip shares have been sold down to a level that makes them bargains for investors with a long-term view. Both companies have outstanding management teams, strong balance sheets, and are well-positioned for long-term growth. Although nothing is guaranteed in investing, I would not be at all surprised to see both shares retrace their declines in the coming months.

Finally, Flight Centre and Harvey Norman are not the only shares which I believe investors should be taking a closer look at investing in today. These five fantastic shares are right up there amongst the best shares for investors, in my opinion. All are expected to pay solid dividends and I feel share price gains are a real possibility too.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.  I contribute to The Motley Fool as a freelance writer and the thoughts and opinions in this post are my own, not that of The Motley Fool’s.

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