2 excellent ASX 200 blue chip shares to buy

There are some really good S&P/ASX 200 Index (ASX:XJO) shares that could be worth investing in, like Bapcor Ltd (ASX:BAP).

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Some S&P/ASX 200 Index (ASX: XJO) blue chip shares are excellent and might be worth thinking about for your portfolio.

When you can find a business that’s quite defensive during recessions, and demonstrating good growth during normal times, then that could be a really attractive long-term investment.

These two ASX 200 blue chip shares could be excellent ideas:

Xero Limited (ASX: XRO)

Xero is building a reputation as a world leader in the cloud accounting space. It has close to 3 million subscribers spread across numerous countries including New Zealand, Australia, the UK, the USA, South Africa and Singapore.

The business is heavily focused on long-term growth, rather than short-term profitability. Management believe this will drive the most value for shareholders. After a period of cautious spending during COVID-19, Xero is getting back to expectations for total operating expenses to be 80% to 85% of operating revenue in FY22.

That spending is on things like product development and marketing. The Xero product is why it has subscribers, so it should try to ensure it has the best product that keeps getting better. Marketing is what brings new subscribers. Those new subscribers are coming with a long lifetime expectation, so it adds value to the business and gives the ASX 200 share further operating leverage.

Xero has been finding bolt-on acquisitions that it expects to add value, faster, for subscribers and improve the Xero offering. Those acquisitions were Planday, Tickstar and Waddle.

Management believe that small businesses will be a major driver of economic recovery in a post-pandemic world. This is Xero’s main client base. But even during downturns, businesses need to keep doing their bookkeeping and tax returns so that the ATO knows about their profit (or less) position, wages and so on.

Bapcor Ltd (ASX: BAP)

Bapcor is Australasia’s biggest auto parts business. Not only is it the market leader in Australia and New Zealand, but it also now owns 25% of a leader in Asia. Tye Soon is a Singapore-listed auto parts business that has operations in several Asian countries.

In a normal recession, Bapcor might be able to expect elevated levels of demand due to people trying to extend the life of their vehicle if a part breaks by replacing that part, rather than buying a new vehicle.

COVID-19 has been a particularly strange recession because there has been elevated levels of second hand car sales as well as very strong retail sales at Autobarn.

Burson is really driving profit higher. It’s demonstrating all the growth you could want – same store sales increasing, more Bursons opened and profit margins increasing.

A promising area of future growth for Bapcor is that Burson is starting a network in Thailand. After that, there may be more Asian countries on the horizon for Burson to grow into.

Asia is a huge region with a very large population. Bapcor is well-placed to grow its profit domestically with an ever-expanding network as well as growing earnings from Asia. According to Commsec, the Bapcor share price is valued at 20x FY22’s estimated earnings.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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