A lot of ‘mum and dad’ or retiree investors prefer ‘blue-chip’ shares due to the perception that they’re less volatile or ‘safer’ compared to the mid cap or small-cap end of the market.
To an extent this is true as the larger a company is the less volatile its profits are likely to be, but it’s impossible to hide from risk in the share market.
As large-cap shares can perform terribly over the short or long term and psychologically anchoring to ‘blue chip shares’ as ‘less risky’ can be a catastrophic mistake compounded if you hold onto long-term losers.
So let’s take a look at the 10 worst ‘large-cap’ shares over the past 12 months and consider whether they could be buy, holds, or sells today. All stats according to Commsec as at Aug 2, 2019.
AMP Limited (ASX: AMP) is down 48.4% over the past year and down around 85% since 2007. The financial services group does not look any better than a ‘hold’ to me, despite its plans to try and rightsize the business.
Bluescope Steel Ltd (ASX: BSL) is down 30% on the back of the US/ China trade tariffs. I don’t know enough about this business to hazard a guess as to the outlook for the shares though.
Lendlease Group (ASX: LLC) is the construction giant that has posted weaker-than-expected results recently and flagged problems at its engineering arm.
Cimic Limited (ASX: CIM) is another construction business that is suffering from weak construction activity and soft new home builds in Australia as the economy takes a turn for the worse.
Boral Ltd (ASX: BLD) is a building materials and cement business that is largely focused in the US where it has blamed a housing slowdown for weaker-than-expected results.
Oil Search Limited (ASX: OSH) is the PNG and Alaska-based LNG producer that recently blamed a softer-than-expected June quarter out of PNG on ‘timing issues’, among other factors.
Wesfarmers Limited (ASX: WES) is the investment conglomerate that’s recently made bids for Kidman Resources Ltd (ASX: KDR) and Lynas Corporation Ltd (ASX: LYC). Investor confidence in the group’s valuation appears to be sagging.
Alumina Limited (ASX: AWC) is the aluminium and bauxite producer investors are marking down on the back of sagging aluminium prices.
Origin Energy Ltd (ASX: ORG) is the LNG business and electricity retailer that continues to carry a net debt pile around $6 billion. This is not helping investor confidence.
Caltex Australia Limited (ASX: CTX) shares are down as its ‘servo’ or retail business underperforms and as refining margins come under pressure.
Aside from AMP none of these businesses have lost more than 30% in the past year, which suggests the theory that large-cap or ‘blue-chip’ shares tend to carry a less risk than smaller businesses is generally correct.
Still, I would not suggest buying shares in any of these businesses on the basis that they are ‘cheap’ or turnaround opportunities.
In fact I reckon the businesses named below are probably far better bets….
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You can find Tom on Twitter @tommyr345
The Motley Fool Australia owns shares of and has recommended Wesfarmers 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.