I think that Wesfarmers Ltd (ASX: WES) is the best ASX blue chip share right now.
Wesfarmers doesn't exactly have a ton of competition for the title of best ASX blue chip. ASX banks like Westpac Banking Corp (ASX: WBC) and miners like BHP Group Ltd (ASX: BHP) have been patchy over the decades.
The (mostly) retail conglomerate seems like a reliable pick in most aspects. Here are some of the reasons why I think it's a good pick:
Strong performing businesses
The crown jewel of Wesfarmers is Bunnings. The hardware business is now the key profit centre after the divestment of Coles Group Limited (ASX: COL). In good economic times Bunnings is a solid performer with a healthy construction industry.
During these COVID-19 times we saw that a lot of people went to Bunnings to do some home improvements during the lockdown.
Wesfarmers revealed in its retail trading update that in the second half of FY20 to May 2020, Bunnings sales were up 19.2%. We also heard that Officeworks' sales were up 27.8% and Catch's gross transaction value sales were up 68.7%.
I like businesses that can keep performing in all economic conditions.
Investment flexibility
One of the main things I like about Wesfarmers is its ability to regularly change what operating businesses it owns. It used to own Coles Group Limited (ASX: COL) and Kmart Tyre and Auto. Management was comfortable divesting those businesses.
In recent times Wesfarmers has acquired Catch (an online retailer) and Kidman Resources (a lithium miner).
Having the ability to evolve over time is important. The better growth opportunities may be in different industries in the coming years. Wesfarmers can pivot the overall business towards that growth will help it continue its solid earnings performance.
Wesfarmers is focused on shareholder returns
Ultimately, shareholder returns is what management should be focused on. As long as it doesn't come at the expense of the long-term health of the company.
I like how Wesfarmers is willing to try new things, such as the attempt to take Bunnings to the UK. But management are also willing to end initiatives when appropriate. The closure of many Target stores is one recent example.
It's a solid dividend share on the ASX and continues to reward shareholders.
Foolish takeaway
Wesfarmers certainly isn't cheap at a share price of $44. But the ongoing strength of Bunnings, Officeworks and Catch justifies this price in my opinion. I'd be happy to buy a parcel of Wesfarmers at today's price, but I'd only buy more if the ASX share market falls again.
