Are blue-chip ASX stocks good investments?
Are blue-chip ASX stocks good investment choices on ASX?
Well, I think it depends on what âblue chipsâ means and what an investor is hoping for. And what does an investor think of.
What is an ASX blue chip share?
Blue chips aren’t fun colorful fries.
They are generally reliable companies that can be counted on in tough times to stay strong.
I also think that âblue chipâ means that the company is generally performing very well over time, that it is a quality company that performs reasonably well for investors.
For the ASX, we’re probably talking about companies within the ASX 20.
Are ASX blue chip stocks good?
There are a few business groups in ASX 20, with banks, such as Westpac banking company (ASX: WBC) and Commonwealth of Australia Bank (ASX: ABC).
For me, what interests me is how much a business can potentially increase profits over time. Different factors come to mind, how much can his income and profit margins improve? Also, how strong are the company’s competitive advantages?
I don’t think the big four banks have great potential for growth. They are already huge. And they seem to be suffering from recessions.
The point is, many of the top-notch ASX stocks are concentrated in Australia (and New Zealand). ANZ is a good place to do business, but both countries have relatively small populations. So unless companies can diversify or expand overseas, I don’t think they have much potential for growth.
There are some that look good, at the right price, like CSL Limited (ASX: CSL), Wesfarmers Ltd (ASX: WES), Goodman Group (ASX: GMG) and Macquarie Group Ltd. (ASX: MQG). May be Telstra Company LtÃ©e (ASX: TLS) enters this group, we’ll see.
Sharing resources like Rio Tinto Limited (ASX: RIO) and BHP Group Ltd. (ASX: BHP) are a little different. This could It makes sense to try to get them back during times of weakness for the commodity they are mining, if you like dividends.
If I wanted exposure to many blue-chip ASX stocks, I would much prefer to invest in a listed investment company (LIC) like WAM Leaders Ltd (ASX: WLE) or an exchange-traded fund (ETF) such as ETF BetaShares Australia 200 (ASX: A200) which would provide this diverse exposure.
However, if I had to choose Forever Silver or blue chip ASX stocks, I would go for blue chips.
Broaden the search
There are other ways of thinking about âblue chipsâ. One could simply consider a company that is a leader in its industry. That way you could look outside of the ASX 20. Names like Bapcor Ltd. (ASX: BAP), Sonic Healthcare Ltd (ASX: SHL) and Limited Brickworks (ASX: BKW) come to mind.
There is also the possibility of considering global blue chips that apparently have longer-term growth potential like Microsoft, Alphabet and Costco. ETFs can be a good way to gain exposure to global stocks such as IShares S&P 500 ETF (ASX: IVV), ETF BetaShares Global Sustainability Leaders (ASX: ETHI), BetaShares Global Quality Leaders ETF (ASX: QLTY) and MSCI Vanguard Index International Equity ETF (ASX: VGS).
I would prefer my wallet to go for those smaller ASX blue chip or global blue chip equities with more growth potential.