Investors usually turn to the biggest companies in Australia when deciding to buy blue chips. Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Woolworths Limited (ASX: WOW) and BHP Billiton Limited (ASX: BHP) are some of the names people turn to.
However, I think there are potential problems with each of the above businesses at the current prices. But that doesn't mean there aren't large 'blue chips' out there you can buy.
Here are two blue chips with market capitalisations over $8 billion I think are worth a place in your portfolio:
Macquarie Group Ltd (ASX: MQG)
Macquarie is Australia's largest listed investment bank with a market capitalisation of $29.7 billion.
It has significantly altered its business since the GFC so that it's less cyclical. It now has a number of 'annuity-style' businesses such as aircraft leasing which provide a more reliable source of earnings.
Macquarie earns more revenue overseas than it does in Australia. This is a good strategy because it can focus on any world region that looks like it will experience more growth in the future. This is the case in the USA where it appears Macquarie could benefit from the Trump administration's tax changes.
Macquarie is trading at 14.6x FY17's estimated earnings with a partially franked dividend yield of 4.83%.
Sonic Healthcare Limited (ASX: SHL)
Sonic is one of Australia's largest healthcare businesses, it focuses on pathology and has a market capitalisation of $8.8 billion.
The great thing about Sonic is that it has operations in Australia, New Zealand, the UK, Ireland, Belgium, Germany and the USA.
Sonic is very diversified. If there's an issue that's country-specific then it won't affect the overall business too much. A good example of this happened recently when the Australian government wanted to reduce funding for pathology. The Primary Health Care Limited (ASX: PRY) share price was affected more than Sonic because Primary is more Australian-focused.
In Sonic's half-year report to 31 December 2016 it disclosed that earnings per share grew by 2.6% and the dividend grew by 3.3%.
Sonic Healthcare is trading at 19x FY17's estimated earnings with a partially franked dividend yield of 3.5%.
Foolish takeaway
You don't have to buy the top 10 biggest companies on the ASX. There are some good businesses that are just a bit smaller in the ASX50, but still have blue chip status.
Out of the two I've mentioned, at the current prices I prefer Macquarie because there is a good chance it could grow earnings faster than Sonic due to the Trump Administration policies that could be enacted in the future.
If these two blue chips aren't for you, then you should check out these other fantastic blue chips.
