Snap Up These 3 Unloved Blue Chips

Snap up these 3 unloved blue-chips

These top stocks won't stay cheap for long.

Andrew Mudie

Andrew joined the growing team of Motley Fool freelance writers in mid-2013 following years of personal development as a passionate self-taught sharemarket investor. At the time, Andrew was an engineer by trade, writer by hobby, and an investing nerd by passion who spent far too many breaks reading, writing and learning. Andrew’s first investing lesson came with his first stock selection in 2011 when takeover rumours caused a spike and subsequent plunge in the share price of Woodside and then the 21% fall in the market through mid-2011. The next four years of investing saw Andrew dabble in a vast array of strategies until settling on his favourite investment methodology, which is closely aligned with that of the Motley Fool: Fundamentals-based long-term buy-and-hold of great companies at great prices.

Published August 4, 2014 6:01 am AEST

Unloved stocks can often be the best investments, especially when owned by long-term investors looking for quality companies. Companies can be unloved for a myriad of reasons, be it poor recent operational performance, an anticipated change in their relevant industry, or weak market sentiment.

Long-term investors should always be alert to opportunities to pick up quality companies on the cheap due to short-term disappointment or misguided pessimism from 'Mr Market'.

I have found three companies trading close to their 12-month lows despite being widely regarded as blue-chips and having strong, sustainable business models. These types of business models create a competitive advantage over peers and often result in the company being described as having a 'moat'.

ASX Ltd (ASX: ASX) owns and operates the Australian Securities Exchange that most of us use to complete our share transactions. Declining volumes, low volatility, and increased competition have conspired to push the share price lower recently and at this point in time the company is roughly in the middle of its 12-month high and low. It operates the dominant service in Australia and is introducing new products to take better advantage of investors seeking yield. This should help to sustain the group's 5.2% fully franked dividend yield and help grow earnings in coming years.

Oddly, while some of its rivals in the healthcare space are constantly hitting new highs, CSL Limited (ASX: CSL) is sitting less than 5% from its 12-month low of $62.83. CSL's business is in the research, development, manufacture, marketing and distribution of blood and blood plasma products. CSL has a strong history of innovative products and the company's global scale allows it to compete strongly on price in order to deliver a terrific return on shareholder capital of over 20%.

Finally, Coca-Cola Amatil Ltd (ASX: CCL) is sitting just 3% from its 12-month low after new MD Alison Watkins flagged that big changes will be required to return the company to its former glory. The company's products are recognised worldwide and Coke remains the dominant soft drink, despite global consumption declining. CCA has its work cut out, but the current price may be looked at as a bargain in five years' time.

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