3 standout blue chip ASX stocks I'd buy today

They may be out of favour, but that's a golden opportunity

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published May 22, 2014 2:42 pm AEST

Yesterday, Motley Fool Share Advisor analyst Scott Phillips asked me which three stocks I'd buy if I was given $10,000 to invest.

Funnily enough, my answer included two stocks I already own. One has been hammered since the beginning of the year, down 18.5%, compared to the S&P / ASX 200 Index's (Index; ^AXJO) (ASX: XJO) 3.7% rise.

That stock is Coca-Cola Amatil Ltd (ASX: CCL) and it's been covered extensively by other Motley Fool contributors and myself recently, including here and here. This is a quality business struggling with what we see as short-term issues. Over the long-term, Coca-Cola Amatil should out-perform the market handsomely from here.

The other stock I already own, but would buy more of is M2 Group Ltd (ASX: MTU). Currently trading on a prospective P/E ratio of just 11.5 for this financial year, and 10.3 times earnings for the 2015 financial year, M2 looks relatively cheap compared to its peers, including TPG Telecom Ltd (ASX: TPM) which currently sports a P/E ratio approaching 30. M2 has yet to report a full year of earnings from its recent acquisitions Dodo and Primus, and may well surprise the market when it reports its 2014 full year results in August.

And last, but by no means least, the third stock I would buy would be Insurance Australia Group (ASX: IAG) – a company I've also written about recently. For some reason the market has taken the red marker to Insurance Australia Group, despite the potential growth coming from the company's recent acquisition of Wesfarmers Ltd's (ASX: WES) large insurance underwriting business, and its solid 7% fully franked dividend yield.

All three are solid blue chip businesses paying decent dividends with strong brands, and the potential to generate much higher earnings over the medium to long term. These three companies could also be an excellent start on the road to significant wealth for retail investors.

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