Most investors have heard of blue-chip companies, but much less (I’d wager) know where the term hails from. It actually refers to the highest value chip in classic poker, which is traditionally blue. Hence, the moniker of ‘blue-chip stock’ refers to companies of the highest quality, value or size – some might call them the ‘safest bets’ on the stock market.
Be warned though, stocks like AMP Limited (ASX: AMP) and Telstra Corporation Ltd (ASX: TLS) were only a few years ago considered the bluest of blue-chips, but that didn’t stop their share price halving in the years that followed.
So here are two ASX blue-chips that, in my opinion, are some of the best buys today.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is probably the most diversified stock on the ASX. It’s most famous for its Bunnings Warehouse brand of hardware stores, but also owns Kmart, Target, Officeworks and a range of industrial companies such as Kleenheat Gas and CSBP Industrial Chemicals and Fertilisers. It even owns the King Gee and Hard Yakka clothing brands. This wide array of businesses means you are getting an incredible amount of diversity in one WES share, and exposure to some of Australia’s favourite brands as well. For these reasons, I think Wesfarmers is a fantastic blue-chip company for anyone to own.
Coles Group Ltd (ASX: COL)
Coles was actually owned by Wesfarmers until November last year (Wesfarmers still retains a 15% stake) when it was spun-off to live ASX life on its own. Coles is the second largest grocery/supermarket chain in Australia and has recently impressed the market with an ambitious ‘Smarter Selling’ cost-cutting program (involving supply-chain automation and lowering duplication). Coles shares are actually trading at a new all-time high of $14.85 as of today, but I still think this business provides enough defensive earnings and dividend potential to justify a long-term buy.
Both of these stocks are fantastic blue-chip companies that would be great additions to any portfolio, in my view. Although both companies aren’t at bargain prices right now, opening a small position and dollar-cost averaging over time might be a good way to play it.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited and 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.
- ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000 – July 6, 2020 8:50am
- Gold at record highs! Are ASX gold miners or ETFs a better bet? – July 5, 2020 9:00am
- How I’d build a $100,000 portfolio with ASX growth shares – July 4, 2020 10:00am