Investors with a lower than average tolerance for risk might want to consider the two ASX shares named in this article.
They are high quality companies with strong business models, competitive advantages, and fair valuations – three characteristics that usually make an ASX share a good investment.
Let's dig a little deeper into what these safe ASX shares offer investors right now:
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CSL Ltd (ASX: CSL)
This biotechnology giant is arguably the highest quality company on the Australian share market.
It is the owner of the CSL Behring, CSL Seqirus, and CSL Vifor businesses. These are leaders in their respective fields of plasma-derived therapies, flu vaccines, and iron deficiency products.
The last couple of years have been a touch underwhelming for the company's shareholders. This has been caused by margin headwinds weighing on its performance. However, with many analysts predicting strong earnings per share growth over the coming years, now could be a great time to invest.
The team at Bell Potter certainly believes this is the case. This morning, the broker initiated coverage on CSL's shares with a buy rating and $345.00 price target. It said:
In our view the stock looks undervalued on a PE ratio 18%/8% below 5yr/10yr historical averages and is set for double-digit earnings growth driven by the core Behring division.
Telstra Group Ltd (ASX: TLS)
Telstra could be another safe ASX share to buy now. It is of course Australia's leading telecommunications company.
Due to how internet and mobile phones are must-haves for most Australians, demand for them remains consistent whatever is happening in the economy. And with competition in the telco industry now very rational and prices increasing across all major operators, Telstra has been generating higher earnings from its key mobile business in recent years.
Goldman Sachs expects this to strong form to continue and underpin solid earnings growth. It recently said:
We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive. We also believe that Telstra has a meaningful medium term opportunity to crystallise value through commencing the process to monetize its InfraCo Fixed assets – which we estimate could be worth between A$22-33bn.
Goldman has a buy rating and $4.35 price target on its shares. In addition, the broker is expecting Telstra's shares to provide fully franked dividend yields of 4.8% and 5.1% in FY 2025 and FY 2026, respectively.
