ASX blue-chip shares consist of companies that are of high quality and large size. These are usually household names that are solid, stable and can be relied on to provide good long-term returns.
Blue-chip companies include shares that have been favoured by the market for years and usually decades.
The 3 ASX blue-chip shares featured in this article have stood the test of time. Each share has also proven it can provide reliable returns to shareholders over many years. In my view, these shares would be suited to retirees and growth investors alike and can be considered high-quality investments.
Given the current market downturn, I believe now is a great opportunity to buy ASX blue-chip shares at cheap prices. So, here are 3 blue-chips I’m watching closely right now.
Ansell Limited (ASX: ANN)
When buying blue-chip shares at cheap prices, it’s harder to go wrong. However, I think companies that will hold their own through the current situation are a great choice.
Ansell is a manufacturer of industrial and medical gloves and personal protective equipment. Its products include those used in hospitals, which at this point are in high demand. While there has been some pullback in its industrial glove business, this will be offset by increased demand from hospitals.
Ansell recently reaffirmed its FY20 earnings guidance and expects to see earnings growth in the current period, despite the conditions that are battering markets.
While Ansell was previously well known for its condom lines, it sold this business in 2017 to focus on gloves and personal protective equipment, a great decision considering the current climate.
Even though these factors can help Ansell to sail well through the coronavirus pandemic, this ASX blue-chip company’s share price has not been spared. Despite faring better than the S&P/ASX 200 Index (ASX: XJO), the Ansell share price is down 15% from its high reached in February, which places the company on a dividend yield of 2.4%.
Woolworths Group Ltd (ASX: WOW)
It’s no secret that supermarkets have fared extremely well through the COVID-19 crisis. Woolworths is a blue-chip retailer that will see key parts of its business lifted significantly in the current climate. This is due to the panic buying in supermarkets, along with lockdowns as consumers have limited choices about where to spend their money and are required to stay home.
In an announcement in March, CEO Brad Banducci said: “In recent weeks, sales growth across the Group’s retail businesses has been strong (with the recent exception of Hotels), reflecting unprecedented demand for a range of products as customers have consumed more at home and stocked their pantries.”
Although Woolworths has been forced to close its hotels business, this segment made up only a small portion of earnings in previous years. With its supermarkets experiencing unprecedented demand, we could expect to see the company weather the current crisis fairly well. Despite this, Woolworths shares have fallen from their February high of $43.96 to $35.89 at the time of writing.
Woolworths shares trade on a fully franked dividend yield of 2.8%. The blue-chip company has not yet announced the impact of COVID-19 on FY20 earnings. But, it did make an announcement informing what we all already know – that groceries have been flying off the shelves. According to news reports, liquor sales have also seen a spike during the current crisis.
When the crisis comes to an end and Woolworths’ hotel business reopens, this will also provide a boost to earnings.
Coca-Cola Amatil Ltd (ASX: CCL)
Coca-Cola Amatil is the bottler of Coca-Cola Co (NYSE: KO) beverages in Australia, along with a variety of other beverages. It is known for having a significant protective ‘moat’ around its products with famous brands providing protection from competition. This is the concept Warren Buffett often describes when explaining the value proposition of a company.
The Coca-Cola Amatil share price has dropped sharply from $13.18 in February down to $8.33 at the time of writing. In my view, this drop reflects sentiment by investors toward the share market. Money is being pulled out of the company’s shares despite any seemingly significant risk to long-term earnings. So while a short-term interruption to earnings can be expected, I think this is a market overreaction.
According to Coca-Cola Amatil, earnings have only reduced in the single digits since COVID-19 started to really affect the economy in March. In any case, there’s certainly short-term pressure on profits. In the long term, however, I believe earnings should stabilise as consumer patterns return to normal.
At this stage, the main reduction in sales volumes has been caused by consumers no longer attending cinemas, restaurants, sports and other activities. However, some of this shortfall has been made up by increased online and supermarket sales.
Unless you are betting that people will not return to their normal daily lives after the impact of the coronavirus is contained, I’d expect this blue-chip company to return to normal earnings in the near future.
At the time of writing, Coca-Cola Amatil shares have a trailing dividend yield of 5.5%. In the long term, I believe this company will maintain its household name and blue-chip status for decades to come.
Where to invest $1,000 right now
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Motley Fool contributor buylowsellhigh5 has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Ansell Ltd. 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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