The Motley Fool

Should you buy these unloved blue chip shares?

Legendary investor and Warren Buffett’s mentor, Benjamin Graham, once stated that: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

I interpret this to mean that in the short term the popularity of companies with investors will largely dictate the direction that their share prices go, whereas in the long term the results they deliver will have the biggest impact.

With that in mind, I thought I would look at a few of shares that have become largely unloved by investors to see if there’s an investment opportunity. They are as follows:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The pizza chain operator has deservedly fallen out of favour with investors over the last 12 months after missing its full-year FY 2017 earnings guidance by a decent margin. While this is disappointing for long-term shareholders, I believe it has created a buying opportunity for others. Especially those that are willing to make a long-term investment. With the company aiming to more double its footprint and increase its margins meaningfully over the next seven years, I think Domino’s could grow significantly.

Telstra Corporation Ltd (ASX: TLS)

This telco giant has also fallen out of favour with investors over the last 12 months. Concerns over the sustainability of its dividend in an ultra-competitive market with lowering margins has been behind the weakening investor sentiment. While I am optimistic that 5G internet and a potential write-down of the NBN by the Federal Government could be opportunities for Telstra to surprise to the upside in 2019, this is by no means a certainty. While I think Telstra is an attractive option at the current price, I wouldn’t make it a staple of your portfolio.

Westpac Banking Corp (ASX: WBC)

Westpac and the rest of the banking sector have seen their respective share prices dragged notably lower in the last 12 months due to the bank levy and the ongoing Royal Commission. I think this has created a buying opportunity for investors that have little exposure to the banks already and Westpac would be my first pick. Its shares are trading below historic averages and offer an attractive trailing fully franked 6.6% dividend.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. 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 Scott Phillips.

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