S&P/ASX 200 Index (ASX: XJO) blue chip shares are good options to help deliver long-term returns and stability for your portfolio in my opinion.

Blue chips are seen as safer shares and are usually the leaders in their industry. Some people may think that blue chips have low growth potential. I think that’s true about some blue chips like BHP Group Ltd (ASX: BHP) and Woolworths Group Ltd (ASX: WOW) that are already huge players, but there are other blue chips that I think are good long-term buy ideas:

A2 Milk Company Ltd (ASX: A2M)

A2 Milk is one of the leading infant formula businesses. The company continues to grow its market share in the key China market. In the FY20 half-year result A2 Milk said that it grew its China infant formula market share from 5.4% in December 2018 to 6.6% in December 2019.

The company has remained resilient in the face of the COVID-19 pandemic with people stocking up on A2 Milk’s products. The business is high quality and the products are also seen as high quality. I think quality will win out during this pandemic. 

The ASX 200 share saw such strong trading that its earnings before interest, tax, depreciation and amortisation (EBITDA) margin is now expected to be in the range of 31% to 32%, rather than the goal of 30%. I think that shows that as the business grows its margins can improve further.

It’s steadily growing its market presence in the US and China, which should allow for bigger profits over the years. Plus, there are plenty of other countries like Canada to generate earnings from in the future.

At the current A2 Milk share price, it’s trading at 30x FY22’s estimated earnings.

Wesfarmers Ltd (ASX: WES)

I think Wesfarmers could be one of the best examples of an ASX 200 blue chip share available to Aussies.

It was set up in 1914, so it clearly has excellent longevity. The business is now largely a retail conglomerate with subsidiaries that are leaders in their respective fields. Bunnings, Officeworks and Kmart have proven to be very good businesses. The acquisition of online retailer Catch seems like a really smart move in hindsight.

I like that Wesfarmers is willing to acquire businesses in new industries to improve its earnings profile and add more diversification to the business. The Kidman Resources deal was a good example of this – lithium clearly has a compelling future, but it was quite brave to move into a new industry.

The ASX 200 share is also willing to divest businesses if it no longer makes sense to own them such as the decision to sell the Curragh coal mine.

At the current Wesfarmers share price, it’s trading at 25x FY22’s estimated earnings with a grossed-up dividend yield of 4.75%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Patts is one of the oldest businesses on the ASX. It has been listed since 1903. If that isn’t good staying power I don’t know what is.

The ASX 200 share started off as a pharmacy business – which is where the name of the chain of Soul Pattinson chemists comes from – but it has since turned into a multi-billion investment conglomerate. Australian Pharmaceutical Industries Ltd (ASX: API) is now the operator of the Soul Pattinson chemists. And Soul Patts is a major shareholder of API.

Soul Patts also owns shares of other businesses like TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), Clover Corporation Limited (ASX: CLV) and Bki Investment Co Ltd (ASX: BKI).

The great thing about Soul Patts is that, like Wesfarmers, it can change its investments over time to future-proof itself. This ability to change its portfolio makes Soul Patts a ‘forever’ share in my opinion, rather than just a long-term idea.

It’s currently working on investing in a new industry – regional data centres. This could prove to be a timely investment with the ongoing COVID-19 pandemic causing a shift to working from home for plenty of workers.

At the current share price, Soul Patts offers a grossed-up dividend yield of 4.3%.

Foolish takeaway

I really like all three of these ASX 200 blue chip shares. A2 Milk may be able to generate the biggest returns over the next five years as its global expansion continues. But I think I like the idea of owning Soul Patts shares the most due to its defensive portfolio and ultra-long-term investment outlook.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why the Appen share price gained 53% in the first half of 2020
• Fund manager warns that ASX bank dividends facing multi-year bad debt hit
• Why the Domino’s share price gained 30% in the first half of 2020
• The difficulty of investing in shares right now

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 Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of A2 Milk and Wesfarmers 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 3 top ASX 200 blue chip shares to buy appeared first on Motley Fool Australia.

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I think some ASX shares would make great candidates to buy and hold for the next decade.

Over the long-term it’s beneficial for your wealth if you can avoid over-trading your share portfolio. Each transaction you make incurs brokerage and each crystallised gain triggers a capital gains tax event. You want to avoid these types of costs where possible.

But you don’t want to be left holding a dud ASX share for years either. I think it’s important to invest in great shares to start off with and just enjoy the ride.

That’s why I think these three ASX shares would be great ideas to buy and own them for the next decade:

Share 1: Bubs Australia Ltd (ASX: BUB)

At the moment Bubs is my favourite small cap ASX share idea. The company is displaying all of the right attributes to generate strong returns over the next decade.

For a long-term idea I like to see a large potential total addressable market that the company is only just beginning to tap. The infant formula ASX share is growing in China, Vietnam and I’m sure it has it’s aiming for other Asian countries with consumers that want high-quality products. In 10 years we may see Bubs sold in places like North America or even Europe.

I also want to see that the company is growing its profit margin. Economies of scale is another factor for delivering strong profit growth. In the FY20 half-year result the company saw its gross margin increase from 19% to 24%. In June 2018 the gross margin was just 14%.

The other factor I like to see is effective leadership. Bubs has done a really good job of expanding its domestic and international distribution channels as well as securing its supply chain, particularly with the Deloraine manufacturing facility acquisition.

I’d like to buy shares at the current Bubs share price.

Share 2: Altium Limited (ASX: ALU)

Altium has been one of my preferred long-term ASX share ideas for quite a while.

The ongoing COVID-19 pandemic is definitely going to cause a hit to margins and profit in FY20. The upcoming US election may also cause a lot of volatility, particularly if Joe Biden wins and reverses the recent US corporate tax cut.

But the ASX ideas in this article are for a 10-year investment, not 10 months.

I believe Altium is one of the brightest prospects on the ASX. The electronic PCB software business is still aiming for global market leadership by 2025. I think it was a smart move to try to keep growing market share over the last few months, rather than trying to protect short-term profit margins.

The world is getting increasingly technological and Altium is an important part of that. Some of its clients include Google, Apple, Tesla, Space X, Amazon, Disney and so on. These are high-quality clients to have.

Altium’s balance sheet is in a strong position with no debt. It hasn’t needed to do a capital raising like a lot of other mid-caps on the ASX over the past six months.

I think the ASX share has quality and focused management that can turn the business into a global leader by 2030, if not much earlier.

At the current Altium share price it’s trading at 49x FY22’s estimated earnings.

Share 3: Magellan Global Trust (ASX: MGG)

Magellan Global Trust is one of the best listed investment trusts (LITs) out there in my opinion. It’s operated by the high-performing Magellan Financial Group Ltd (ASX: MFG), with rich lister Hamish Douglass at the helm.

The ASX share aims to invest in the highest-quality global shares that it can find. At the moment those names include picks like Alibaba, Alphabet, Atmos Energy, Microsoft, Tencent, Facebook, Visa, Mastercard, Reckitt Benckiser and Novartis.

It regularly outperforms its global benchmark after fees and targets a distribution of 4% of its net asset value (NAV).

At the current Magellan Global Trust share price it’s possible to buy this LIT at a small discount to its NAV, which is attractive in my opinion.

Over the next decade I think this ASX share could generate solid net returns.

Foolish takeaway

I think all three of these ASX shares are quality ideas which can outperform the ASX over the next decade. However, I’m a bit nervous of what may happen in the US due to COVID-19 impacts and the upcoming election, so whilst I’d be happy to buy Altium and Magellan Global Trust shares today, an even better price could come up later this year. I’d pick Bubs first at today’s share price.

More reading

• Bubs and 1 other exciting small cap ASX share to buy
• Why the RPMGlobal share price could be a bargain buy right now
• My ASX share for the week
• 3 ASX shares that I’d invest $1,000 into EVERY month
• 2 fantastic ASX growth shares to buy with $2,000

Tristan Harrison owns shares of Altium and MAGLOBTRST UNITS. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. 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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One notable advocate of buy and hold investing is legendary investor Warren Buffett.

Mr Buffett has famously stated that his favourite holding period is forever. And given the success he has had over several decades, it can pay to listen to his advice.

Three quality ASX blue chip shares that I think Warren Buffett would approve of are listed below. Here’s why I think they could be top buy and hold options:

CSL Limited (ASX: CSL)

I think this global biotech company would tick a lot of boxes for Mr Buffett. CSL has a high return on equity, talented management team, and long track record of generating strong earnings growth and returns for shareholders. It also has a very positive long term outlook thanks to its in demand therapies and its high level of investment in research and development.

REA Group Limited (ASX: REA)

Another company which I think could be a Buffett share is REA Group. It is the leading property listings company in the ANZ region and has a number of growing businesses in other regions. While its performance is likely to be impacted by a reduction in listings because of the pandemic, I’m confident that this is just a short term headwind and its growth will accelerate once the crisis passes. So with its shares down 10% from their high, now could be a good time to consider a long term investment.

SEEK Limited (ASX: SEK)

A final share which I think could interest Mr Buffett is SEEK. This is due to the job listings company’s dominant position in the ANZ market and its growing China-based business. I believe these businesses have positioned SEEK perfectly to grow its earnings at a very strong rate over the next decade. Management certainly sees things this way. It has set itself an aspirational revenue target of $5 billion later this decade. This will be a massive increase on the revenue of $1,575 million it expects to report in FY 2020.

More reading

• Is the REA Group share price in the buy zone?
• Where to invest $10,000 into ASX 200 shares right now
• Why I think the Polynovo share price is a buy right now
• Pushpay and 1 other ASX tech share to buy right now
• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended REA Group Limited 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.

The post 3 high quality blue chip ASX shares Warren Buffett might buy appeared first on Motley Fool Australia.

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Fortunately for income investors in this low interest environment, the Australian share market is home to a large number of dividend-paying companies.

Three ASX dividend shares which I think are in the buy zone right now for income investors are listed below. Here’s why I would buy them:

Dicker Data Ltd (ASX: DDR)

Dicker Data is a wholesale distributor of computer hardware and software. Due to an increasing number of vendor relationships and robust demand for information technology products, Dicker Data has been growing its earnings and dividends at a strong rate over the last five years. This has continued during the pandemic thanks to the work from home initiative and the shift to the cloud. As a result, Dicker Data intends to lift its fully franked dividend by 31% to 35.5 cents per share in FY 2020. Based on the current Dicker Data share price, this represents an attractive 5% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share that I would buy is Telstra. With the telco giant’s medium term outlook looking the brightest it has been in a long time, I think now is a great time to invest. This improving outlook is due to its T22 strategy, rational competition, and the easing of the NBN headwind. Combined, I believe a return to earnings and dividend growth could be on the cards in the coming years. For now, though, I believe its 16 cents per share dividend is sustainable. Which based on the latest Telstra share price, equates to a fully franked 4.6% dividend yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

A final option to consider buying is the Vanguard Australian Shares High Yield ETF. This exchange traded fund gives investors exposure to 62 of the highest yielding shares on the ASX through just a single investment. This includes the likes of the big four banks, mining giants, and Telstra. At present I estimate that its units offer a forward dividend yield of at least 4.5%.

More reading

• a2 Milk and 1 other quality ASX share to buy right now
• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide
• Strengthen your retirement portfolio with these ASX blue chip shares
• Why I would put excess funds into ASX dividend shares instead of a savings account
• 3 ASX dividend shares growing their payouts fast

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and Telstra 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 Why I would buy Telstra and these ASX dividend shares appeared first on Motley Fool Australia.

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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a very positive note and stormed notably higher. The benchmark index climbed 1% to 5,977.5 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 set to give back some gains.

The ASX 200 looks set to give back some of yesterday’s gain on Tuesday. According to the latest SPI futures, the benchmark index is expected to open the day 47 points or 0.8% lower. This follows a disappointing start to the week on Wall Street, which saw the Dow Jones trade flat, the S&P 500 drop 0.9%, and the Nasdaq sink 2.1% lower.

Oil prices drop.

Energy producers Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO) could come under pressure today after oil prices dropped lower. According to Bloomberg, the WTI crude oil price fell 2.4% to US$39.56 a barrel and the Brent crude oil price dropped 2.4% to US$42.22 a barrel. Oil prices fell ahead of the next OPEC meeting.

Tech shares on watch.

It could be a difficult day of trade for tech shares such as Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO) on Tuesday after their U.S. counterparts sank lower. Overnight on Wall Street the technology-focused Nasdaq index was up as much as 1.9% before ending the day 2.1% lower. Investors appear to have been taking profit off the table after the index broke through the 11,000 points mark for the first time.  

Gold price edges higher.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could be on the rise today after the gold price edged higher. According to CNBC, the spot gold price rose 0.15% to US$1,804.70 an ounce after coronavirus cases continued to increase

AMP downgraded.

The AMP Limited (ASX: AMP) share price will be on watch today after the financial services company revealed that it has been downgraded by Standard and Poor’s. The ratings agency has lowered its rating on AMP from BBB+ to BBB. It is also on credit watch with negative implications.

More reading

• Why the Appen share price gained 53% in the first half of 2020
• Are these small cap ASX shares future tech stars?
• Fund manager warns that ASX bank dividends facing multi-year bad debt hit
• Why the Domino’s share price gained 30% in the first half of 2020
• The difficulty of investing in shares right now

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of Appen Ltd. 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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