Top 5 Blue Chips ASX Shares to Invest in 2021
Blue chip companies refer to those companies that are financially stable and well off. Blue chip companies are well recognised and well established companies that sell widely accepted and popular goods and services. They are defined by their ability to do well particularly during crises and bounce back up.
Blue chip companies spend a lot of time building up their brand and product, this gives them stability even during crises. Typical examples of blue chip stocks include Pepsi and Coke, these companies have built up products that sell no matter what the economic condition is.
Blue chip stocks are usually included in the top indices of any country, for instance you can find blue chip stocks in the S&P500 and NASDAQ 100. Similarly ASX has also got blue chip stocks that the investors can identify by their characteristics.
Blue chip stocks are considered as low risk, safe stocks that investors can bank on. This is why most investors include blue chip stocks in their portfolio, in order to stabilise the portfolio. Most of the retirement funds invest in blue chip stocks for their low risk and stable returns.
Let us now take a look at some of the blue chip stocks listed in the ASX.
1. BHP Group
BHP group is in the mining sector and is perhaps the safest bet for any investor. Currently the shares of BHP are trading around AUD 64. BHP has a market capitalisation of over 149 billion. The price earnings ratio for BHP is also good and shows that the market has got confidence in BHP.
BHP is also showing a good dividend yield.The stock price movements during 2020 also show a positive trend for BHP. Even though the year was turbulent for business but BHP share price recovered very well after the market crash in March. BHP is now trading at its highest value during the year, this trend is expected to continue into 2021.
The performance shown by BHP is typical for a blue chip company. BHP is driving this performance because of the iron ore and copper mining that it controls. Both of these minerals are key exports of Australia and have been crucial in sustaining the economy during the pandemic.
2. Telstra Corporation
Telstra is an Australian telecommunications company. Telstra has had a long time to develop their products and services that are used in Australia. The company has a market capitalisation of over 35 billion.
The share price movement chart shows a turbulent year for Telstra shares but since it is a blue chip stock, it is expected that Telstra will recover soon. Presently Telstra is trading low and this has created opportunities for investors to buy into the shares of Telstra before the share prices start rising.
Recently the board announced an increase in dividends and with the expected arrival of 5G in the near future, Telstra shares are expected to pick up soon.
3. Goodman Group
The goodman group is a multinational group that owns, operates and manages both industrial and commercial real estate. They also provide logistic solutions and are present in 17 countries. It can therefore be seen that the Goldman group has over the years built their products and services, which they have then spread into multiple countries. Thus becoming a blue chip company.
Goldman group had an occupancy rate of almost 98% on their properties which is one of the key indicators that investors look for in a REIT. This shows that inspite of the pandemic, Goldman group has maintained a high occupancy rate. This was complimented by the higher than expected earnings.
The share price movement for the Goldman group has been very positive in 2020, in spite of the global recession. The share price is on its upward trajectory. The P/E ratio shows that the market is showing confidence in the company. Investors therefore can invest into Goldman group with peace of mind as this stock seems stable for the foreseeable future.
4. Sonic Health Care
Sonic is situated in the health care sector and provides laboratory, pathology and radiology services. This is one of the sectors that have been positively affected by the pandemic. Sonic is Australia’s largest health care providing companies and for this reason it is a blue stock company. It is a staple name in the health care sector.
The share price movement shows that 2020 was not a bad year at all for Sonic. The share prices recovered after the March 2020 crash and at present the share price is around AUD 32. The P/E ratio is also quite high which shows that the market has attached positive sentiments with Sonic. Once again these are all tell tale signs of a blue chip company.
Just because a company is considered as a blue chip company does not mean that it carries low risk and will therefore not result in loss for an investor. Blue chip companies often create losses for investors. This is why investors must carry out their own due diligence before choosing any company to invest into.
The reason why due diligence is required is because each company be it a blue chip, gilded or penny stock company. Each company is exposed to different categories of risk factors and it depends upon the management and other localised factors, whether the company can mitigate those risks and convert them into profits.
Investors should therefore consider the risk profile, management, profitability, liquidity and leverage before deciding whether to invest in a company. Share performance alone is not a decisive factor.
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