ASX blue chips could be smart ideas to own during all of this uncertainty and share market volatility.
Blue chips are typically ones that have strong positions in the market and can offer more reliability in times of economic difficulties.
But I wouldn’t just buy any blue chip. I would only want to go for ones with good compound growth potential. For me, ones like Commonwealth Bank of Australia (ASX: CBA) don’t have that growth potential because of the size and industry dynamics.
But I do like these two ASX blue-chip shares:
Wesfarmers Ltd (ASX: WES)
Wesfarmers is one of the best blue-chip options in my opinion.
Firstly, I love the optionality of the business. Meaning, it can decide to buy and sell businesses. Wesfarmers didn’t always own Bunnings or Catch. It bought them.
The company also used to own Coles Group Ltd (ASX: COL) and coal assets. But it is no longer is responsible for those businesses.
I like the look of the Mt Holland lithium project, which is being worked on. This could start operating when lithium prices are very high thanks to huge demand with electric vehicles.
Most of the businesses within this ASX blue-chip share are high-quality in my opinion.
Bunnings, Officeworks and Kmart are clear leaders in their respective sectors.
Bunnings in particular is a fantastic business that generates impressive returns on capital (ROC). In HY22 Bunnings made a ROC of 79%. It recently acquired the Beaumont Tiles business as well.
I think that Catch also has a good long-term future with how many different products it can sell through an online model. No stores are needed, reducing operating costs.
As an added bonus, Wesfarmers is one of the solid ASX dividend shares, in my opinion.
The Wesfarmers share price is around its 52-week low, so it could be a good time to buy shares.
Goodman Group (ASX: GMG)
Goodman may be the best real estate business on the ASX.
It develops, owns and operates industrial property around the world. In this age of increasing digital sales and more need for logistics, Goodman’s offering is very valuable.
The ASX blue chip share is benefiting from stronger organic rental income growth, higher valuations and strong demand for new properties to be built.
In the Goodman FY22 half-year result it reported that its operating profit increased by 28% to $786.2 million.
The business now has $68.2 billion of assets under management (AUM). It’s expecting to grow operating profit per share by 20%.
However, with rising interest rates, I’m a little more wary of the Goodman share price, so I’d probably wait until the Goodman share price had dropped below $20.
