I've always been a strong advocate of the long term, buy and hold investment strategy and I think every investor should try to balance their portfolios with stable blue-chips that have long-term potential. According to legendary investor Benjamin Graham, people who consistently buy and sell are speculators, while those who buy and hold quality companies based on solid fundamentals, are investors.
With the ASX returning around 12% per annum on average for the past 112 years, I think there is no better time to reap some stellar returns for your family's financial future. Here are five quality blue-chips stocks that I think have the potential to make your grandchildren rich in the future, and if you don't have any yet, well, you've got a head start!
Woolworths Limited (ASX: WOW) as Australia's favourite retailer, is the owner of popular brands such as BIGW and the supermarket stores. Woolworths is a definite company for buy-and-hold investors given its strong competitive advantages. Its products from budget stores like BIGW are always in demand, even in a market downturn when incomes are lower. Furthermore, its sheer size and business model makes it hard for smaller competitors to steal its market share and with plans of entering the financial services arena, earnings are set to fly higher in the next few decades.
Sitting on a modest price-to-earnings ratio of 18 and offering a fully franked 3.8% dividend yield, Woolworths is a definite buy for the long-term investor.
Insurance Australia Group Ltd (ASX: IAG) is another large-cap market dominator, operating well known brands such as NRMA and SGIO. Following its stellar FY14 results, IAG is looking good for another year of growth. Its recent $1.845 billion purchase of Wesfarmers' underlying insurance wing is set to provide it with synergies of about $230 million until FY16, as well as a steady stream of revenues. I think IAG will be able to run Wesfarmers' insurance business much more efficiently, given its insurance specialisation.
Selling for $6.53, IAG trades on around 11 times trailing earnings figures and combined with its tasty 6% fully franked dividend yield, IAG may make your portfolio sizzle for the decades to come.
CSL Limited (ASX: CSL) is involved in the research, manufacturing and distribution of blood plasma products in a multitude of geographical areas. Like Woolworths and IAG, CSL is a massive company that is set to reap future growth opportunities. Companies like CSL are also set to benefit given our ageing population. After recent gains, CSL sits on an expensive price-to-earnings ratio of 25, but its future growth potential tells a different story and I think it's a solid buy-and-hold candidate.
