There are plenty of experienced investors out there who believe it's time to be careful with the market looking increasingly fully valued.
Deciding whether to keep a portion of your portfolio in cash might be a tough decision given the opposing views of some experts. However, for the equities portion of your portfolio there remains a number of attractive opportunities.
Listed investment company (LIC) Bki Investment Co Ltd (ASX: BKI) recently released its full year results. The release detailed some of the purchases that BKI had made in the past year including:
- ASX Ltd (ASX: ASX)
- National Australia Bank Ltd (ASX: NAB)
- Santos Ltd (ASX: STO)
- Suncorp Group Ltd (ASX: SUN)
- Wesfarmers Ltd (ASX: WES)
The above five stocks all exhibit qualities which should make them decent long-term investments. Those qualities include being large, established businesses, dividend paying, and leaders in their respective industry.
Importantly, after accounting for the differing expected future growth rates and the quality of each stock they still look to be available at reasonable prices today. Here are the forecast price-to-earnings multiples for financial year 2016 according to Morningstar:
- ASX: PE of 20x
- NAB: PE of 12.9x
- Santos: PE of 13.9x
- Suncorp: PE of 14.1x
- Wesfarmers: PE of 18.9x
For investors who remain undecided as to whether the market is undervalued and likely to head higher in the near term, or alternatively whether the market faces serious headwinds which could force it lower, owning large blue-chip stocks that are highly liquid could be a sensible way to hedge your bets.
