Buying Great Stocks at Low Prices
Our Blue Chip Value Portfolio’s strategy of buying on weakness and holding has been working, with a 10% return on Qantas Airways (QAN) since we tipped it four months ago in Issue 115, 21 October 2022; while our buys on big mining stocks like Rio Tinto (RIO) are delivering. RIO has climbed 42% in the past three months and has returned 17% a year for the past three years. Similarly, backing the banks has been the right call, with National Australia Bank (NAB) returning 22% in the past 12 months.
If you are interested in learning more about Blue Chip Stocks and how to invest in this area, read more here.
Buying when sentiment is low is the key as well as focusing on Blue Chips with strong fundamentals. Equities are the most forward-looking of all investments, which means today’s prices are based on what happens well into the future.
We focus on consumer-facing stocks this week, which includes retailers JB Hi-Fi (JBH), Super Retail (SUL), and its competitor in auto parts, Bapcor (BAP), as well as Flight Centre (FLT). We also look at the mining giant Rio Tinto (RIO) and its latest production numbers.
The retail sales that came out this month were better than expected, prompting buying in the sector. If anything, we’re seeing consumers being more adventurous, with record numbers heading offshore for holidays. At the big end and at the small end, retailers are doing better than the market had feared, either through reported sale numbers or simply through investor enthusiasm.
We have been well-timed with our selection in Small Caps of Retail Foods (RFG), which has climbed 75% in three months since we tipped it. In this issue, we’ve found a stock that has similar characteristics to RFG in our Blue Chip universe.
Buying on weak sentiment and strong fundamentals is proving a very profitable strategy.
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