Many retiree investors seem to think that the only blue chips worth holding are Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Telstra Corporation Ltd (ASX: TLS).
However, I think there are better blue chip options for growth than the big banks and Telstra, like these three:
Macquarie Group Ltd (ASX: MQG)
Australia’s leading investment bank is a much more attractive financial option to me than the four domestic-focused banks.
A majority of Macquarie’s earnings are generated overseas, giving it significant earnings diversification. It can expand in whichever geography it thinks is the best opportunity.
Another major positive is that Macquarie has shifted its focus to ‘annuity-style’ businesses that generate a more consistent level of income. In-fact, Macquarie is now seen as the leading global infrastructure manager.
Despite the impressive growth performance, it’s trading at a reasonable 16x FY19’s estimated earnings.
CSL Limited (ASX: CSL)
CSL is Australia’s largest healthcare business. It reported yet another impressive year of profit growth today.
Demand for CSL’s products will continue to grow with Australia’s ageing population and rising healthcare needs. CSL is continually investing money for the long-term which should see earnings grow by double digits for years to come.
It’s definitely not cheap trading at 36x FY19’s estimated earnings, however over a decade I imagine it will demand a much higher share price.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is making a number of large moves to simplify its business. It is divesting Coles, selling its coal assets and recently announced it’s selling Kmart Tyre and Auto Service for $350 million. It was decisive in ending the UK Bunnings expansion plan.
The conglomerate has proven time and again it can take an underperforming business and turn it into a solid performer, except for the recent UK expedition. Management will need to tread carefully with the next move, but the current leadership seem very aware of what is best for shareholder returns.
However, online retail competition could prove a problem for the remaining retail-focused businesses of Officeworks, Target and Kmart.
I much prefer Wesfarmers to Woolworths Group Ltd (ASX: WOW). Wesfarmers is currently trading at 20x FY19’s estimated earnings.
I’m a fan of all three of these blue chips compared to the big banks and Telstra, although none of them are in my portfolio. At the current prices I’m most drawn to Macquarie – I believe its progressive, forward-thinking investment focus will serve it well over the long-term.
CSL looks a bit too expensive at the moment, there isn’t much margin of safety at the current price.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Wesfarmers Limited. The Motley Fool Australia owns shares of National Australia Bank 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.