If you’re wanting to add some blue chip ASX shares to your portfolio, then you’re certainly in luck.

The Australian share market hosts a number of blue chips which I believe could generate strong returns for investors in the 2020s and beyond.

Three blue chip ASX shares that I would buy are listed below. Here’s why I like them:

Cochlear Limited (ASX: COH)

I think this hearing solutions specialist could be a great blue chip share to buy. I’m bullish on Cochlear’s long-term outlook due to its exposure to the ageing populations trend. This is because hearing tends to fade as people get older. I expect this to lead to strong demand for its high quality products over the next couple of decades and drive consistently solid sales growth. Another positive is the industry’s high barriers to entry, which I expect to limit competition.

CSL Limited (ASX: CSL)

Another blue chip share to look at is this biotherapeutics giant. I see a lot of value in CSL’s shares for long-term focused investors. This is due to the positive outlooks of its two businesses – CSL Behring and Seqirus. CSL Behring is the global leader in plasma therapies and Seqirus is the second biggest player in the influenza vaccines industry. I believe both businesses can grow strongly over the next decade thanks to favourable industry dynamics, their leading products, and high levels of investment in research and development.

SEEK Limited (ASX: SEK)

A final blue chip ASX share to consider buying right now is SEEK. I think the job listings giant is a great long-term option due to its strong market position and its investment in future growth opportunities. These investments and its fast-growing China business are expected to play a key role in SEEK achieving its ambitious aspirational revenue target of $5 billion later this decade. This compares to revenue of $1,537.3 million in FY 2019.

More reading

• Australian businesses are running out of cash
• 3 ASX shares I’d buy if the market crashes again
• Consider these 3 quality ASX healthcare shares to buy now
• Invest like Warren Buffett by buying and holding these ASX 200 shares
• Why top brokers are urging you to buy SEEK and these other ASX stocks today

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The bulls and bears are in a Mexican standoff! The S&P/ASX 200 Index (Index:^AXJO) can’t seem to move much from current levels as investors wait for a circuit breaker.

Optimism about the re-starting of our economy is offset by fears of a second wave of COVID-19 infections.

But there are some ASX stocks that have already started slumping after leading brokers downgraded their recommendations on these shares.

Taking a toll

The first is the Transurban Group (ASX: TCL) share price after UBS cut its rating on the toll road operator to “neutral” from “buy”.

That sent the stock 2.3% into reverse as it fell to $14.45 during lunch time trade.

The downgrade comes even as management issued a positive update recently. Traffic volumes are recovering faster than what many expected and management said it will pay a half year dividend of 16 cents a share. UBS was only expecting an 11 cent a share distribution.

Dividend doubts

However, dividends over the longer-term may not meet previous expectations.

“Although there is no specific dividend guidance for FY21, there is a repeated intention to only pay out underlying free cashflow excluding capital releases,” said UBS.

“Our forecasts incorporate this as a new dividend policy which dampens longer-term distributions considering the magnitude of forecast WestConnex (WCX) capital releases.”

It also doesn’t help that the Transurban share price is outperforming the broader market, making valuations less attractive.

UBS’ 12-month price target on the stock is $14.85 a share.

Rising costs challenge

Meanwhile, the Qube Holdings Ltd (ASX: QUB) share price got a double hit as not one, but two brokers downgraded their recommendation on the stock.

The move comes even after the logistics group signed Woolworths Group Ltd (ASX: WOW) as a key tenant at its Moorebank intermodal facility.

The customer win is one factor supporting the stock’s outperformance, although that isn’t the only reason why Morgans and Citigroup lowered their rating on Qube.

“QUB has advised of a $60m increase in capex related to upgrading Moorebank Avenue prior to its realignment,” said Morgans.

“In addition to this and the WOW DC capex, QUB says the minimum capex it expects to incur to fund Moorebank will be higher than previous forecast, with an update to be provided at the FY20 result.

“Each $100m unexpected cost increase reduces our valuation by 5 cps.”

Morgans changed its recommendation on Qube to “reduce” from “hold” with a price target of $2.45 a share.

Too much good news in the price

Citi also noted that Qube is funding more of the development and warehouse capex for tenants than originally expected.

“Qube’s share price has risen 34% since its equity raising in early May 2020,” said Citi.

“With the near-term operating outlook still highly uncertain, we lower our recommendation from Buy/High Risk to Neutral with a $3.15 target price.”

More reading

• 3 ASX shares I’d buy if the market crashes again
• Is the share market facing another February 2020 moment?
• This top fund manager believes dividend yields are going to 0%. Where should you invest?
• Can the Newcrest share price crest to new highs?
• Here’s why I think the Link share price has a huge growth opportunity ahead

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. The Motley Fool Australia owns shares of Transurban Group and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Australian businesses are running out of cash according to a survey done by the Australian Bureau of Statistics (ABS).

Reporting by the Australian Financial Review of the survey showed that around 30% of small businesses have cash on hand that will last for less than three months of business operations. It gets worse for larger businesses – 24% of medium businesses and 12% of large businesses have less than three months of cash to support business operations.

The survey was done on 2,000 businesses between 10 June 2020 and 17 June 2020.

The ABS said: “Several businesses commented that existing cash on hand would not be sufficient to maintain operations if not for government support measures.” Government measures like jobkeeper and the cashflow support are due to expire at the end of September 2020.

Revenue has also been heavily affected. Around a quarter of businesses suffered a revenue fall of up to 25%, 37% of businesses saw revenue drop between 25% to 50%, 17% of businesses lost 50% to 75% of revenue and 14% suffered a revenue hit of more than 75%.

What does low cash mean for ASX shares?

Cash is extremely important. You could say cash is king. Businesses need cash to pay for their wages and other expenses.

Many businesses have done capital raisings to ensure their balance sheets remain in good shape through this difficult time. Shares like National Australia Bank Ltd (ASX: NAB), Bapcor Ltd (ASX: BAP), InvoCare Limited (ASX: IVC), Webjet Limited (ASX: WEB), Challenger Ltd (ASX: CGF), Flight Centre Travel Group Ltd (ASX: FLT), Cochlear Limited (ASX: COH), Lendlease Group (ASX: LLC), Ramsay Health Care Limited (ASX: RHC) and Bendigo and Adelaide Bank Ltd (ASX: BEN) are just some of the news to undertake a capital raising to ensure they have enough liquidity.

For me, I think businesses running low on cash is obviously worrying for ASX shares that have a focus on business customers like NAB and Australia and New Zealand Banking Group (ASX: ANZ).

There are other ASX shares with a focus on business customers like Xero Limited (ASX: XRO) and Prospa Group Ltd (ASX: PGL), but it’s hard to say how they will be affected.

Banks are already expecting that not all businesses will make it through this difficult period. That’s why the big ASX banks of ANZ, NAB, Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have all collectively provisioned billions of dollars for COVID-19 impacts.

Prime Minister Scott Morrison himself has warned that not every job and business can be saved. Time will tell how many businesses end up going under.

Thankfully most ASX shares seem to be doing okay through this period. Virgin Australia Holdings Ltd (ASX: VAH) has been the highest profile casualty so far, but it’s getting close to a rescue deal. The airline is in the final stages of a saviour selection process.

What ASX shares could be worth buying?

There is a still a lot of uncertainty. There are growing infection numbers in several countries.

Valuations of some shares like Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Xero are running hot again. Growth shares will probably do well over the long-term, but over the short-term they may be a little too expensive today if growth is hurt over the rest of 2020.

I like the idea of investing in shares that can keep growing regardless of what happens next. I’m thinking of shares like Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), Bubs Australia Ltd (ASX: BUB), A2 Milk Company Ltd (ASX: A2M) and Pushpay Holdings Ltd (ASX: PPH). These businesses are generating positive operating cash flow. 

Defensive shares that may be fairly immune to more COVID-19 disruptions could also be solid ideas like APA Group (ASX: APA), TPG Telecom Ltd (ASX: TPM), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and CSL Limited (ASX: CSL).

More reading

• 3 ASX payments shares that could double your money
• Give your portfolio a boost with these ASX blue chip shares
• Bapcor and 1 other quality ASX share to add to your portfolio
• 3 ASX shares I’d buy if the market crashes again
• Is the share market facing another February 2020 moment?

Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Bapcor, BUBS AUST FPO, Challenger Limited, PUSHPAY FPO NZX, Washington H. Soul Pattinson and Company Limited, and Webjet Ltd. The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, and APA Group. The Motley Fool Australia has recommended Cochlear Ltd., Flight Centre Travel Group Limited, InvoCare Limited, and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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