Blue Chip Looking For Defensive Stocks

Richard Hemming

Blue Chip shares and reporting season

There have been a number of themes coming through from reporting season, but the most important one is the importance of not playing the FOMO game when it comes to Blue Chip shares. There is a great deal of hype in the stock market evidenced by the US stock market hitting all-time highs. You don’t have to look far down the track to see that government fiscal stimulus measures such as JobKeeper are going to be either removed or tapered down. When confusion reigns, investors will sell non-income producing Blue Chip shares and revert to value: sustainable earnings, balance sheet strength and dividends. The Blue Chip shares that don’t look sexy now are the ones to look to buy. 

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It’s clear that investors are taking a couple of days to react to results of reporting season. Often the first reaction following the numbers is reversed on the second and/or third day following the numbers. It’s also clear that in the first instance and leading up to results, investors are taking a glass is half full approach, buying Blue Chip shares before considering. Don’t be one of them.

What is going to happen over the next six to 12 months with Blue Chip Shares?

What we’re going to see over the next six to 12 months are the real swimmers; those that can produce sustainable profit growth. The momentum Blue Chip shares that are ticking boxes cannot keep going. You’re playing the greater fool game if you jump on board at escalated prices.

In the same token, we’re seeing a number of interesting Blue Chip shares popping up, which have been sold off aggressively and we’re looking to jump in with some small positions. Bargains are emerging and Blue Chip Value’s team is investigating whether they’re profit making opportunities or value traps. It’s all about fundamental analysis. Stock picking is your only reliable friend when you are looking to invest for the long-term. Join today to uncover the Blue Chip shares we rate as buy. 
 
Speaking of which, we are happy holders of a number of bank stocks, which have been rallying of late. This is telling us that the market is getting its head around the prospect of normality sooner rather than later, led by positive news on vaccine development. As far as we can see, investors are pricing in the probability of a full blown vaccine early next year. Bank stocks are a good barometer of investor thinking. Let’s hope they’re right.

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About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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