Buy ASX Shares that you know at the right price
Richard Hemming
What a week, what a month. As you would imagine, my #GetRichWithRich campaign is going up another gear.
In the past day, I’ve purchased a bag of ASX Shares including: Mach7 Technology (ASX:M7T), Retail Foods (ASX:RFG), Integrated Research (ASX: IRI), LaserBond (ASX:LBL) and Silk Logistics (ASX:SLH).
Get value from Quality Blue Chips are growing
As I have pointed out, you are getting much better value from quality Blue Chips that are growing dividends than you are from the 10-year bond yield of 4.1%. You are also getting value because you often use their services. I bought stock in Sydney Airport because I got sick of the exorbitant parking fees, which the dividends paid for and then some after it got taken over.
Why do you like Woolworths, Coles, Wesfarmers and Telstra?
A big reason you own stocks like Woolworths (WOW), Coles (COL), Wesfarmers (WES) and Telstra (TLS) is because you shop there. You spend your money with them. Plus, in Australia, there are often comfortable duopolies, ensuring competition never gets too fierce and profits can be shared around.
But it’s also true that every company has its time in the sun. Results were all over the place for the three retail giants Coles, and Woolworths and the owner of Bunnings and Kmart, Wesfarmers. Woolworths is suffering in supermarkets and BigW. Coles is going gangbusters and Kmart hit the ball out of the park with 26.5% earnings growth on sales only up 5%.
Just because a stock is performing well, it doesn’t mean you buy it.
I get more excited when a company doesn’t do well and is punished, actually. I don’t often jump on bandwagons. Contrast the rise and rise of Wesfarmers in the past 12 months (which has only accelerated) to the anaemic performance of Coles and Woolworths. Guess which ones I’m buying? COL & WOW.
Coles is recovering from a disastrous time only six months ago (see Issue 137) when it failed to meet company guidance and suffered cost blowouts on its robotic warehouses. Fast forward to today and Coles has a new CEO Leah Weckert, who definitely got a pass mark at her second result as CEO.
Woolworths’ CEO Brad Banducci did do a good job, but had his exit accelerated and is being replaced by Amanda Bardwell whose stewardship of the eCommerce businesses under the WooliesX umbrella has been outstanding and was a standout performer in a difficult result. I like this stock after the fall, which is trading at its lowest level for 18 months. Independent research means we back our recommendations with our money. Please join us in celebrating Issue 150.
We’re Celebrating 150 Issues of Blue Chip Value
Which brings me to ASX Blue Chip and our celebration of issue 150. We kicked off Blue Chip Value just after Trump got elected back in 2017 – well about seven months after he was elected. We had a magazine format back then.
The 10-year bond rate was 2.5% or there abouts, now its 4.1%. The ASX All ords was 5,800 now it’s about 7,900, up 36%, driven by those big beautiful blue chips.
We quickly realised that Trump’s promise of being the infrastructure president wasn’t coming to fruition. We also realised that we needed to get back to what our subscribers want – stock picking and independent analysis, embodied in our #GetRichWithRich campaign. We’ve been covering just over 40 blue chips, which we regard as quality companies we’re always looking to buy, at the right price.
Here are three things you need to know about big ASX Blue Chip stocks:
1. Big is beautiful when it comes to dividends – we are buying them primarily for income and a bit of growth.
2. Big is beautiful when it comes to mining – mining is about scale and the bigger you are, the better.
3. Big is beautiful when it comes to oligopolies. We want stocks that have cosy relationships where they can spread huge profits around and not kill each other. Think the banks.
Here’s a fourth bonus point: the point of big companies is to take risks in small caps. The time has never been better for this.
Why I like ASX Small Cap Integrated Research (ASX:IRI)
The one that most impressed me was Integrated Research (ASX:IRI) because it’s trading at a discount to net tangible assets and its cash flow positive.
IRI manages mission-critical communication services for corporates. There is some disruption going on with its on-premise solution when the market is moving in mass to the cloud, but its balance sheet is as impressive as I’ve seen. Current assets are double total liabilities. The company has $21m in cash, something like $70m in debtors or receivables that have a default rate of less than 1%. All for a market cap of something like $60m.
I’m not saying I’ll or we will shoot the lights out necessarily, but you need a few of these stocks in your portfolio to make it really fire.
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