The Motley Fool

A Special Report

Revealed: The Motley Fool’s Top 3 Blue Chips Stocks For 2019-20

Revealed: The Motley Fool’s Top 3 Blue Chips Stocks For 2020

Thanks for taking the time to access my report. My name’s Ed Vesely and I’m the lead Advisor of a service called Motley Fool Dividend Investor.

Very soon, you’ll receive your first issue of Take Stock. It’s full of vital information and investment ideas that I believe will help you grow, and when necessary, protect your wealth. I recommend you give it a good read. It’ll only take you a few minutes to read each issue, but it could prove to drastically change your financial future.

Now, let’s get to my Top 3 Blue-Chip Stocks for 2020. Blue-chip stocks should form the bedrock of any well-constructed portfolio. But being a household name doesn’t automatically qualify a company as a good investment.

It’s important to focus on dominant businesses, with strong competitive advantages. Large enterprises with these characteristics are usually more profitable and more stable than lower-quality corporate peers.

These companies operate deeply entrenched businesses, and offer investors a fully franked dividend yield with significant growth potential.

Wesfarmers (ASX:WES)

Making Customers Happy

Company snapshot

Market cap: $35.5 billion
Recent share price: $31.34 (as at 12th December 2018)
Cash/debt: $2.2b/$4.1b
P/E ratio: 13.6x
Dividend yield: 4.7% fully franked (approximately)

Wesfarmers was founded in 1914 as a Western Australian farmers’ cooperative, dealing in many segments including; wool, livestock, skin and produce auctioning, grain and fruit export, insurance underwriting, and country distribution for Commonwealth Oil Refineries Ltd (part of today’s BP). One hundred years on, the modern-day Wesfarmers has been through much change — but in the process has grown to be one of Australia’s largest listed companies.

Wesfarmers is well diversified across a variety of different retail chains, many of which are continuing to show strong growth such as Bunnings, Officeworks and Kmart.

Recent Demerger

In the last few months Wesfarmers has gone through a significant restructure with its decision to demerge Coles. Wesfarmers took this decision after forming the view that it will help it divert investment and management focus away from the supermarket company and towards its higher growth/more profitable businesses. We are inclined to agree. Over the last few years, Coles’ revenue has barely budged whilst its archrival, Woolworths (ASX:WOW), hasn’t had the same issues indicating that it has successfully been winning market share. A clean break between the two means that Wesfarmers can focus on getting the best out of the likes of Bunnings and Kmart (which are, arguably, two of the best retail businesses in the country) whilst Coles can focus solely on kickstarting momentum at the supermarket.

Post demerger, Wesfarmers has retained a healthy balance sheet which can allow the company to make further acquisitions

Foolish Bottom Line

An investment in Wesfarmers gets you access to a portfolio of high quality companies — including some of the country’s most dominant retailers — and with some of Australia’s most accomplished capital allocators at the helm, with a Fool-like long-term focus.

Seek (ASX:SEK)

From Humble Beginnings

Company snapshot

Market cap: $6.1 billion
Recent share price: $17.47 (as at 12 Dec 2018)
Cash/debt: $362m/$1.4billion
P/E ratio: 27x (adjusted for one-time events)
Dividend yield: 2.6% fully franked

Seek (ASX:SEK) should be familiar to most Australians. Its website has long been the go-to place for Aussies looking to make a change in their career.

Since forging a dominant position in local markets, Seek has continued to spread its tentacles around the world, and it now operates businesses throughout Asia as well as Brazil and Mexico. It also has a burgeoning venture capital business where the company invests in start-ups in the hope that they become the Seeks of tomorrow.

Getting the job done

Despite volatility in the unemployment rate over the years, Seek Australia has generated annualized revenue growth of approximately 25% per year for over 13 years with forecasted revenue growth for 2019 between 16-20%. Seek also accounts for approximately 36% of placements in Australia, approximately 7 times its nearest competitor, which just goes to show how strong the company’s position is in the local employment market. Despite the success, Seek is remaining proactive and is actively seeking to “strengthen its moat” — which we like to hear. Over the years, it has invested a lot of money into its local business to ward off threats such as that posed by LinkedIn.

International opportunity

Although Seek Asia has the highest profit margins, its Chinese business, Zhaopin, has been the company’s biggest growth driver, with revenue of $461 million in the most recent fiscal year. Zhaopin grew online revenue 18% in its most recent quarter, and 21% in the most recent half-year.

Like its Australian counterpart, Seek has been investing heavily in marketing and product development for Zhaopin which has led to operating profit growth far below its rapid revenue growth. However, this should once again lead to the continuation of strong results in the future. As such, spending is based on management discretion, which also means that when the time is right, the company should be able to pull back and watch its profitability start to rise.

Foolish Bottom Line

Seek remains the undisputed leader when it comes to advertising jobs online. Like REA Group (ASX:REA) in the real estate market and Carsales (ASX:CAR) in vehicles, it attracts the most visits from job hunters which also makes it a must-use portal for companies and recruitment firms alike. This network effect continues to generate great returns in Australia and its international businesses, creating plenty of avenues for future growth. All in all, a promising prospect!

Challenger (ASX:CGF)

Fishing in the Superannuation Ocean

Company snapshot

Market cap: $6.0 billion
Recent share price: $9.5 (as at 12 Dec. 2018)
Cash/debt: $839m /$6.7b
P/E ratio: 18x
Dividend yield: 3.7% fully franked

At an estimated $2.6 trillion, Australia’s retirement savings pool is the fourth largest in the world, and trails only the United States, Japan and Britain. While our savings pool is large on a per capita basis, we still need to save and grow our nest eggs in anticipation of retirement. Once in retirement, many among us intend to draw an income stream from our savings. Challenger addresses these two basic necessities.

A Business Full of “Life”

When you hear “Life,” it’s easy to think of a traditional insurer selling life insurance, but in Challenger’s case, ‘Life’ is all about providing so-called annuity products — policies offering regular income payments in the future in exchange for a lump sum upfront — to people who want to remove the discomfort and anxiety presented by market volatility.

Thus far, results suggest that Challenger’s annuity solutions are a big hit. Challenger has grown annuities sales at a compound rate of 17% per year over the past five years.

A Bag Full of Funds

The other major part of Challenger’s business is its Funds Management business. In the company’s words this business “generally targets the retirement savings phase of superannuation by providing investment products aiming to deliver superior returns in order to maximise superannuation savings.”

In the recently reported annual result, the Funds business grew to $81 billion in assets under management (AUM), up from $70 billion in 2017. According to Challenger, net inflows have consistently outperformed its peers. Not bad!

Foolish Bottom Line

Challenger has recreated the success of an investment vehicle that for a long time belonged to the 1950s and 1960s insurance salesmen. In doing so, it has captured a large share of a growing and profitable market. At the same time, the company has capably addressed the other ‘side’ of the cycle by beefing up its funds management business. The Australian superannuation pool is growing at twice the pace of the global pension system, averaging around 10% growth per year. Add ageing population and increasing longevity into the mix, and we believe Challenger, as the leader in the annuities market, is very well placed to benefit from this tailwind.

When to Buy And When to Sell

I believe the three stocks above are some of the best buys available on the ASX today…

But there are, in fact, five dividend stocks on the market that I believe are hands down THE stocks to have in your portfolio right now. I think this select group of stocks not only trade on attractive dividend yields (often fully franked) but also offer the very real potential of significant capital gains.

As you’ll discover below, the share price of one of my previous “Best Buy Dividend Stocks” soared over 130% higher before I recommended the followers of my advice sell up to lock in their profits.

There’s an old saying that timing is everything – I’m talking about knowing which shares to buy right now, and when is the right time to sell. My list of “5 Best Buy Dividend Stocks” removes all the guesswork, as does my timely sell advice.

Now, while I would love to share my most up-to-date “Best Buys” list with you here, out of respect for the readers of my paid investment advisory, Dividend Investor, I can’t share it publicly. But there is a very easy way for you to access all of my research on my top dividend stock picks in 2019, including my full analysis, dividend yield, franking credits and crucially, timely sell alerts. Let me explain…

LIMITED TIME OFFER: Access Australia’s Best Investment Research WITH NO RISK TO YOUR MEMBERSHIP FEE for 30 Days

As you may know, every day at The Motley Fool, I scour the market for the very best dividend shares on the market. Shares that can pay you a steady income over the next 5, 10, even 20 years, while gaining in value for a fat pay out should you decide to sell.

Just imagine how much more you could do with a stream of cash flowing into your bank account like clockwork every few months. A few smart investments now could even mean an extra ten, twenty, thirty thousand dollars a year in your retirement.

Forget about penny-pinching after you retire. You’d be able to really enjoy your golden years the way you deserve. Money to live the way you want… A holiday house down the coast… trips to exotic countries overseas… spoiling the grandkids… maybe even helping your kids get their foot on the property ladder… heck, you might even be able to quit the rat race a decade early!

The only thing standing between you and this kind of comfortable retirement is knowing exactly which shares to buy.

That’s where I come in. As I’ve mentioned, I’m the lead advisor of what is arguably Australia’s most popular dividend-investing service…

It’s called Motley Fool Dividend Investor. In the last two years, we’ve led thousands of Aussie investors just like you to winners such as…

  • Australian Pharmaceutical Industries (API)… up 133%
  • Altium (ALU)… up 150%
  • Event Hospitality & Entertainment (EVT)… up 62%
  • Not to mention one company trading on a fully franked dividend yield of 8.96%… and six more paying over 6%…

But don’t worry, Motley Fool Dividend Investor readers always come first. We are only allowed to buy a recommendation at least two full trading days after you get it. That means two things:

  1. There’s no conflict of interest. It’s completely transparent and ensures YOU always get first pick and the BEST price.
  2. We are so confident in Dividend Investor’s recommendations that we are willing to buy at a price that’s often HIGHER than my initial tip.

So by now, I expect you’re eager to hear how you can see every single one of my recommendations – 18 active BUYS in all – including the names of my “5 Best Buy Dividend Stocks” you can confidently invest in today.

Well I’m happy to extend you an invitation to join us right now. And because you’re a brand-new Take Stock reader, I’m even going to give you a limited-time exclusive discount.

Even better, your subscription to Motley Fool Dividend Investor is backed by our ironclad 30-day membership fee-back guarantee.

In other words, you get a full 30 days to review everything Dividend Investor has to offer you. You get access to every BUY recommendation and our full research archive. You’re welcome to put money on any of the stocks, or simply paper trade them first.

Then after 30 days, if you’re not convinced that Motley Fool Dividend Investor can make a real and lasting difference to your wealth, simply get in touch with our friendly customer service team, and we’ll refund you every cent of your membership fee.

It’s really that simple and easy. At the end of the day all you’ll sacrifice is a few minutes of your time looking through our research.

But I can say with all confidence, I believe this service WILL likely make you money for decades to come.

That’s why I want to invite you to get in on this tremendous wealth-building adventure today.

Sign up today and you can start enjoying these exclusive benefits of membership right now:

  • One new dividend pick each month – with every single stock a high-conviction dividend play—delivered to your inbox like clockwork, month in and month out.
  • Exclusive access to our members-only website, where you’ll find our “Buy First” stocks and every other Motley Fool Dividend Investor stock pick we’ve ever recommended.
  • An online scorecard that lets you see the performance of ALL our stock tips, including franking credits and dividend yields, in one convenient place.
  • Breaking alerts by email with important market news that impacts your portfolio, including weekly updates on our picks.
  • 24/7 access to our exclusive member-only online discussion boards.

And did I mention your NO RISK to your membership fee trial?

LIMITED TIME DISCOUNT: Get Australia’s BEST Dividend Stock Tips for 50% off The Regular Price

Now usually a subscription to Motley Fool’s Dividend Investor costs $199 a year. That’s already dirt cheap for the kind of in-depth research and high potential recommendations you get. But since you’re a brand new Take Stock subscriber, if you act right now, you can lock in a one year of membership to Motley Fool Dividend Investor for just $99…

That’s a whopping 50% OFF our retail price. And it works out to less than 28 cents a day!

Click here now to secure your subscription at this low, low price

Meanwhile, you can rest assured you’re 100% protected by our 30-day, no questions asked, membership fee-back guarantee of your subscription fee.

That’s right. As I’ve mentioned, you’re entitled to take a FULL 30 DAYS to have a good look at everything Motley Fool Dividend Investor has to offer.

In other words, you have the chance to see every recommendation ever made inside Dividend Investor – names, codes, the full investment analysis for each…

AND see for yourself what Dividend Investor members really think of the service, with ‘no holds barred’ discussion on our proprietary message boards…

Then get all your membership fee back if you so choose.

All you have to do is let our friendly customer service team know that you’d like to cancel any time within your first 30 days.

You’ll receive every cent of your membership fee back. No hassle, no fuss.

But there is just one catch…

If you’d like to take advantage of this very special offer, we need to hear from you right away.

Your no risk to your membership free trial of Motley Fool Dividend Investor at this special low price is available for just a short time – blink and you could miss it.

Yours Sincerely,

Ed Vesely
Lead Advisor, Motley Fool Dividend Investor

SUBSCRIBE NOW

P.S. Keep in mind: This NO RISK to your membership fee TRIAL lets you sample everything Dividend Investor has to offer and potentially pay nothing at all! And as an added bonus, a subscription is likely tax-deductible. Simply click here to get started locking in your 50% off saving.


Ed Vesely does not own any of the shares listed. As at 12th December 2018, unless otherwise noted. The Motley Fool Australia owns shares of Altium, Challenger Limited, Event Hospitality & Entertainment, and Wesfarmers Limited. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. For more information about The Motley Fool see our Financial Services Guide. All returns cited are hypothetical and based on the percentage change between the stock price at the time of recommendation and the current or sell price (if the position has been closed) at the time of publication. Brokerage, taxes and any other associated costs are not taken into account. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. Any money back guarantee is strictly limited to the subscription price paid for the product.