'Blue chip' is an ambiguous term but generally means the most reliable and biggest companies on the stock exchange. Everyone has heard of Commonwealth Bank of Australia (ASX: CBA) and Woolworths Limited (ASX: WOW).
The problem for most Australian blue chips is that they have already reached saturation point in Australia. Australia has a small population unlike the USA.
However, not all blue chips have little growth to offer. There are a few that have market capitalisations of billions of dollars but still have a lot of growth ahead.
Here are three of my favourites:
Seek Limited (ASX: SEK)
Everyone has heard of the biggest job portal in Australia which has significantly more job listings than other site in Australia.
The power of being number one means it attracts the most employers, which attracts the most potential employees, continuing the cycle.
More and more of the employment process will be done online in the future. Seek Learning is tapping into the need for our workforce to be even more qualified.
The big opportunity for Seek is in China with its investment in Zhaopin. China's economy and population is growing every year which should benefit Seek well in the long-term. A population of over a billion people is a good opportunity.
Seek is currently trading at 30x FY18's estimated earnings with a grossed-up dividend yield of 3.46%.
REA Group Limited (ASX: REA)
REA Group's website realestate.com.au is synonymous with real estate in Australia.
Nearly every single property advertised is put up on realestate.com.au. This gives REA Group great power in attracting the most potential buyers and allows management to increase prices at a good rate every couple of years.
REA Group also has promising investments in Asia and the USA which could add a material amount to the profit in a few years.
REA Group is currently trading at 34x FY18's estimated earnings with a grossed-up dividend yield of 1.82%.
Ramsay Health Care Limited (ASX: RHC)
Ramsay is one of the largest private hospital operators in the world.
Australia, France and the UK are its three biggest markets. Each country has an ageing population that will need to make more visits to the hospital as they get older.
Ramsay has very defensive earnings, yet it should continue experiencing strong growth as time goes on. It is steadily expanding its current hospitals and building new ones.
Ramsay is currently trading at 23x FY18's estimated earnings with a grossed-up dividend yield of 2.92%.
Foolish takeaway
I'd much rather have my portfolio of blue chips like the ones I've written about over shares like Woolworths which are showing little sign of growth.
At the current prices I think Ramsay is the only one at good value because of its price decline after reporting that growth would be a little slower in the near future.
