2 of the best ASX 200 blue chip shares to buy

There a few S&P/ASX 200 Index (ASX: XJO) blue chip shares that could be worthy of your attention.

Businesses that have strong competitive advantages and keep investing in their product have a good chance of producing solid long-term returns.

These two may be among the best in the ASX 200:

Xero Limited (ASX: XRO)

Xero is one of the largest technology businesses on the ASX.

It offers small and medium businesses online accounting software which is presented in an easy-to-understand way. It also has plenty of useful tools to help do the accounting work quicker and give the business owner and financial adviser greater insights into how the business is performing.

This offering is proving popular all over the world. Xero is building a global subscriber base in countries like Australia, the UK and the USA. At the latest count, Xero had 2.45 million subscribers at 30 September 2020 – an increase of 19% from the prior corresponding period.

Xero invests heavily for the long-term and addressing customer needs. In the FY21 half-year period it invested $140 million, which was up 29% compared to the prior corresponding period and significantly more than the operating revenue growth of 21%.

It’s a powerful combination with Xero’s gross profit margin of close to 86%. That’s very high for an ASX 200 blue chip share.

Xero CEO Steve Vamos said about the HY21 result:

This result demonstrates the value our customers attribute to their Xero subscription and the underlying strength of Xero’s business model. We continue to prioritise investment in customer growth and product development in line with the long term opportunity we see.

Altium Limited (ASX: ALU)

Altium is another of the leading technology businesses. It wants to be the world-leading provider of electronic PCB software.

It’s trying to achieve that with its Altium 365 product, which is an online cloud offering which allows engineers to collaborate on projects.

This is the world’s first digital platform for design and realisation of electronics hardware and it’s gaining strong early adoption.

Altium 365 will also give the company the opportunity to generate revenue through different models. The company could generate transaction fees on manufacturing (like the Airbnb model) and there’s also the opportunity for premium services (like Amazon Prime).

When Altium reported its FY21 half-year result, it said that Altium 365 had 9,300 active users (up 83%) and over 4,400 active accounts (up 69%).

Over the next few years, the ASX 200 blue chip share is targeting 100,000 active subscribers to compel key industry stakeholders to support its agenda to transform electronic design and its realisation.

It’s aiming to reach US$500 million of revenue by 2025 and this should translate into materially higher profit margins, which will help grow the bottom profit line faster than the revenue.

More reading

• 2 excellent ASX shares that could be strong buys
• How you can become rich buying and holding ASX shares
• Leading brokers name 3 ASX shares to buy today
• ASX 200 down 0.3%: Webjet completes note offering, Xero pushes higher
• Why the Xero (ASX:XRO) share price can go even higher from here

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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