We're often told that one of the safest ways to invest in the share market is to pick blue chips.
But I don't think every blue chip is a good option. I believe we should only consider shares with good prospects at the right price.
For example, I don't think the big banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) are compelling buys because of the lack of growth, higher capital requirements and rising loan arrears.
Within the ASX 50, these are the ones I'm drawn to at the current valuations:
APA Group (ASX: APA)
I think APA Group may be the best infrastructure business on the ASX. It owns natural gas and electricity assets across Australia. Its gas pipelines that connects various areas of Australia are its major asset, but it also has investments in gas storage, power stations and wind farms.
Overall, it's a good diversified energy business which continues to invest significantly into more infrastructure which should produce pleasing earnings growth into the future.
It has an impressive distribution growth record and offers a solid distribution yield of 4.4%.
Aristocrat Leisure Limited (ASX: ALL)
Aristocrat is one of the fastest growing businesses in the ASX 50, so it would be silly not to include it. The company is a gambling machine manufacturer and it's also developing more online games for people to play.
It's one of the few ASX 50 businesses to generate a lot of its earnings outside of Australia and New Zealand, which is one of the main reasons why I think it would be a decent growth share to own for diversification reasons but still keeping up the good returns.
Despite the strong performance over the past year, it's still only trading at 20x FY21's estimated earnings.
CSL Limited (ASX: CSL)
CSL is simply of the best, highest-quality businesses on the ASX. Its long-term focus and impressive research & development pipeline continues to deliver for its patients and shareholders alike.
As a global healthcare giant it is positively exposed to the growing global population, the ageing demographics and the desire for people to spend money on remaining alive and healthy.
CSL continues to seem a bit too expensive but it keeps delivering. As long as interest rates remain lower I wouldn't be surprised to see CSL continue to outperform most of the other ASX 50 shares.
It's currently trading at 35x F21's estimated earnings.
Foolish takeaway
As I said at the start, I'd be happy to buy some shares in any of these businesses at today's prices. For defensive income it's clear that APA is the best choice, the other two have low starting yields. For total returns I think Aristocrat looks like the best bet because of its lower valuation compared to CSL and Aristocrat is still growing at a good pace.
