At the current share price, is Wesfarmers Ltd (ASX: WES) the best S&P/ASX 200 Index (ASX: XJO) blue chip share to buy right now?
Wesfarmers is a diversified business with a number of different segments including home improvement, retail, industrial and energy.
Why diversification is a good thing
You can never tell when something bad is going to come along to knock the economy. Who could have seen the coronavirus coming?
When a business has sector diversification it gives you protection against problems in any particular industry.
Wesfarmers probably isn't getting a strong performance from Target or perhaps even Kmart right now. But Bunnings is apparently doing really well. Why? The amount of people working on a DIY project at home during the lockdowns. Diversification is really helping.
It's a very attractive feature about Wesfarmers that the crown jewel of the business can experience an increase in demand.
I also like that having industry flexibility allows Wesfarmers to look for acquisition targets from any industry. This is great with many businesses now trading at low valuations.
Wesfarmers recently sold down another portion of its stake in Coles Group Limited (ASX: COL) to strengthen the balance sheet. Some of this cash could be used for an acquisition or two.
Is Wesfarmers the best ASX 200 share?
Right now, I prefer Wesfarmers to almost every other ASX 200 share. I think it's a better pick for income than shares like 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).
I believe that Wesfarmers has better long-term growth prospects than shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) too.
Wesfarmers is not exposed to commodity prices moving against it, which makes it better than all the resource shares for me.
I'm not going to list every ASX 200 business, but I think it's up there with the best select few. It may not produce the strongest returns over the next five years, but I believe it will continue to be a solid performer for many years to come.
I'd be happy to hold it in my portfolio, but at 21X FY22's estimated earnings it's not a screaming buy right now.
