When it comes to maintaining a balanced portfolio, I think having a few blue chip ASX shares is a smart move.

Traditionally, blue chips are companies that are well-known, long-established, and have strong financial positions. In other words, they are not going anywhere any time soon, which makes them safer than average options for investors.

But not all blue chip ASX shares are equal and some are better than others.

Right now, I think three of the best ASX blue chip shares are the ones named below. Here’s why I like them:

REA Group Limited (ASX: REA)

The first blue chip share to consider buying is REA Group. I’m a big fan of the property listings company due to the strength of its business, its leadership position, and its solid long term growth potential. Although times are hard for the company right now, it has still been able to generate earnings growth. I believe this bodes well for when these headwinds ease.

Telstra Corporation Ltd (ASX: TLS)

Another ASX blue chip share to consider buying is Telstra. I think it is a great option right now due to the ongoing success of its T22 strategy. This strategy is cutting costs and putting it in a position to return to growth in the coming years. In the meantime, I’m becoming increasingly confident that the company’s dividend cuts are over. I believe its free cash flows will be sufficient to maintain its 16 cents per share dividend.

Wesfarmers Ltd (ASX: WES)

A final blue chip share to consider is Wesfarmers. I think it is one of Australia’s best blue chip shares and well-positioned to deliver solid earnings and dividend growth over the next decade. This is thanks to the quality and diversity of its portfolio, which includes the likes of Bunnings, Kmart, and several chemicals and industrials businesses. The company also has a hefty cash balance which is likely to be used for acquisitions in the near future.

More reading

• Here’s why it’s vital your ASX shares have a moat
• The TPG share price is up 26.68% in 2020. Too late to invest?
• Are Coles shares a buy after falling 12% in 2 months?
• Brokers name 3 ASX 200 shares to buy right now
• Should you worry about geopolitical events in investing?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended REA Group 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.

The post The best ASX blue chip shares to buy in June appeared first on Motley Fool Australia.

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Do your ASX shares have a moat?

If you’re not familiar with the investing term ‘moat’, it’s one that the great Warren Buffett coined many years ago. It refers to the concept of an intrinsic and protective competitive advantage a company has. In an ideal world, this moat should be wide enough that competitors can’t possibly cross it when they attempt to challenge said company. 

What does a moat entail?

Just think of 2 of Buffett’s favourite companies: Coca-Cola and Apple. Coca-Cola is the world’s most iconic cola drink. Its brand dominance is so entrenched that I reckon almost every human being on the planet knows what a ‘Coke’ is.

This enables Coca-Cola to charge more for a drink than its competitors, whilst still being able to maintain its dominant market share. Thus, we can say Coca-Cola has a ‘brand moat’.

Apple operates with a similar level of branding power. It’s able to charge far more than any of its competitors for a computer or a smartphone, safe in the knowledge that people will be willing to fork out semi-exorbitant prices just for the privilege of owning ‘an Apple’.

What about ASX shares?

So how can we apply this concept to S&P/ASX 200 Index (ASX: XJO) shares or the companies in your own portfolio? Well, ask yourself, ‘what makes a consumer buy this product?’ Is it a lack of competition? A powerful brand that helps a company stay above the pack? There are many different kinds of moats, but if a company has one, this is usually a sign that its shares will make a good investment at the right price.

Let’s take Telstra Corporation Ltd (ASX: TLS). Telstra is arguably the most expensive telecom company offering mobile plans in Australia. Yet almost 50% of the market chooses to go with Telstra. That’s probably because Telstra’s mobile network is the fastest and most comprehensive in the country (as its ads keep reminding us).

This is something that Telstra’s competitors can’t easily overcome, hence I would classify Telstra as having a ‘moat’.

It’s a similar story with Transurban Group (ASX: TCL).

Transurban owns and operates a network of toll-roads across the country. If you don’t wish to use one of Transurban’s roads, the only alternative is to find another, longer route around the road which doesn’t attract a toll.

Thus, Transurban doesn’t really have any competitors apart from a free ‘long way round’.

Foolish takeaway

Which companies in your ASX share portfolio would you say have a moat? Moats can protect a business in good times and in bad. And, as Warren Buffett’s track record shows, can also make a company an extremely lucrative investment. So make your next buy a company with a nice moat and your future self will probably thank you!

More reading

• The best ASX blue chip shares to buy in June
• The TPG share price is up 26.68% in 2020. Too late to invest?
• Brokers name 3 ASX 200 shares to buy right now
• Should you worry about geopolitical events in investing?
• 3 dirt cheap ASX shares to buy before it is too late

Sebastian Bowen owns shares of Coca-Cola and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Apple. 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.

The post Here’s why it’s vital your ASX shares have a moat appeared first on Motley Fool Australia.

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