Although it has retreated marginally over the last week, the Australian share market has still been on a tear in 2015. In fact, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has risen a remarkable 9% year-to-date, prompting Citibank to raise their 12-month target to 6,300 – a level not seen since early 2008!
While the rally has been driven primarily by the nation's high-yield blue-chip stocks, a number of other blue-chips have been left behind. Here's a look at three worth considering.
- BHP Billiton Limited (ASX: BHP)
Since nearly breaching the $40 mark late last year, shares of BHP Billiton have been on a downward spiral caused by heavy falls in its two most important commodities. Iron ore and oil prices have been hammered over the last year, putting the miner's earnings and cash flows under enormous strain. This also impacted its ability to initiate a widely-anticipated share buyback program which saw its shares sold off heavily.
Given its low cost base and high level of diversification, BHP Billiton remains one of the safest mining stocks on the market and it is certainly tempting at today's price of $32.12. However, iron ore and oil prices will likely remain volatile for some time yet, making BHP Billiton a risky play. While its long-term potential is still impressive, investors may want to hold onto their existing shares but hold off from buying any more, for now.
- Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Washington H. Soul Pattinson and Co., commonly known as Soul Patts, is often seen as Australia's Berkshire Hathaway – the US investment conglomerate headed by Warren Buffett. While it is substantially smaller, it bares similarities in that it is run by a world-class management team; and it approaches its investments with an ultra-long-term mindset.
Its shares have been weighed down in recent years by its investment in coal producer New Hope Corporation Limited (ASX: NHC), but its various other investments in companies such as TPG Telecom Ltd (ASX: TPM) and Brickworks Limited (ASX: BKW) bode well for the future. Historically, the stock has outperformed the benchmark index and I expect that to continue over the coming decades, making Soul Patts seem like a reasonable buy today.
- Woolworths Limited (ASX: WOW)
A disappointing half-year earnings report capped off what has been a poor year for the supermarket behemoth whose shares have plummeted almost 19% over the last 12 months. Investors are concerned about slowing earnings growth as well as the competitive threat posed by Aldi and Costco.
However, Woolworths is actually presenting as a reasonable buy for long-term investors. Not only is it one of Australia's strongest and most consistent corporations, it also offers a compelling dividend. At today's price of $29.85, the stock trades on a forecast fully franked yield of 4.7% or 6.7% when grossed up for franking credits!
