At today's share price, is global investment bank Macquarie Group Ltd (ASX: MQG) the best blue chip to buy?
Macquarie has been one of the best-performing shares within the ASX20 over the past six months. Its share price has gone up 22%, plus the dividend payment.
Whilst that's great for existing shareholders, it gets harder for potential investors to push the buy button. Growing businesses are worth owning. Macquarie has been great over the past decade, it has been the best large financial ASX business to own. But you shouldn't overpay for a business just because it has done well in the past.
It's now trading at more than 16x FY21's estimated earnings. I'd prefer to invest in Macquarie than the big banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB). Macquarie has more product diversification, geographical earnings diversification and is investing for growth.
I'd prefer to invest in Macquarie over Telstra Corporation Ltd (ASX: TLS) because it doesn't face structural problems like the NBN and it isn't so reliant on one factor for future growth (5G).
I think Macquarie is preferable for my portfolio over the infrastructure shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD). The earnings growth that those two infrastructure giants can produce is limited in scope, particularly Sydney Airport. The high valuations don't help either.
Resource shares like BHP Group Ltd (ASX: BHP) will never appeal to me because of the cyclical, commodity driven nature of their earnings
Retail shares don't appeal to me either with how unlikely market-beating growth will be in the coming years for bricks and mortar businesses, particularly as they're already mature businesses.
Insurance shares Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) aren't bad businesses, but the amount of insurance payouts they face in the future is unknown and unappealing.
CSL Limited (ASX: CSL) is the only business I'd be interested in actually buying over Macquarie, but CSL is now priced so highly that it could worth picking Macquarie instead.
