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.
Foolish takeaway
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.
