The Motley Fool

Should you buy these beaten down blue chip shares?

With the market going into meltdown mode this week it will come as no surprise to learn that a large number of shares have hit 52-week lows or worse.

Three shares that made this unwanted milestone today are listed below. Should you buy these beaten down blue chip shares?

The Commonwealth Bank of Australia (ASX: CBA) share price fell to a 52-week low of $66.07 this morning before bouncing back slightly. As well as being dragged lower by the market selloff, CommBank’s shares have come under pressure due to the Royal Commission, housing market weakness, and news of its customer remediation program. While I don’t expect investor sentiment to improve greatly in the near term, I believe once the negative news flow ends, investors will return to the banks and their shares will recover. This could make it worth considering CommBank and its peers.

The Medibank Private Ltd (ASX: MPL) share price dropped to a 52-week low of $2.74 today. The private health insurer has come under significant pressure this year following the release of a soft full year result and weak guidance for FY 2019. Medibank warned that private health insurance market volumes are expected to remain flat over the next 12 months. Unfortunately, this is likely to mean another year without growth in earnings. While its shares are looking more attractive at 17x earnings, I’d still prefer to pick them up at a lower price that is more befitting of its current growth profile.

The Ramsay Health Care Limited (ASX: RHC) share price has continued its decline and fallen to a 52-week low of $52.12 on Friday. Much like Medibank Private, Ramsay has been struggling over the last couple of years due to lower private health insurance participation levels. As there is not expected to be an improvement in the market any time soon, I think Ramsay is destined to underperform for at least the next couple of years. So, with its shares still trading at a premium to the market average, I would suggest investors wait for them to pull back even further before considering an investment.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care 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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