The S&P/ASX 200 Index is home to the largest companies on the Australian share market, accounting for around 80 per cent of Australia’s stock market capitalisation.
Because the ASX 200 is a market capitalisation weighted index, it is dominated by the largest companies. These are commonly referred to as ASX blue chip stocks.
As at 31st March 2018, the top 10 companies in the ASX 200 and their weightings were…
|ASX Code||Company Name||Weighting|
|ASX:CBA||Commonwealth Bank of Australia||8.17%|
|ASX:WBC||Westpac Banking Corp||6.29%|
|ASX:BHP||BHP Billiton Limited||5.85%|
|ASX:ANZ||Australia and New Zealand Banking Group||5.07%|
|ASX:NAB||National Australia Bank Ltd.||5.00%|
|ASX:TLS||Telstra Corporation Ltd||2.43%|
|ASX:WOW||Woolworths Group Ltd||2.25%|
|ASX:MQG||Macquarie Group Ltd||2.11%|
I’m on record as saying the big four banks are going to struggle to grow their earnings, and therefore their share prices, in the years ahead.
Given the big banks make up around a quarter of the top 200 companies, by definition I think the ASX 200 will be unlikely to make any meaningful progress in the coming years.
I’ve complied a list of 10 ASX 200 stocks that could out-perform the S&P/ASX 200 Index over the next 3 plus years.
You’ll note there is some overlap with the stocks above. Not all ASX blue chips are created equal.
Also, unlike the S&P/ASX 200 Index, I’m not proposing to weight the stocks on market capitalisation or any other measure. They’ll stand both individually, and collectively as a self-contained mini-portfolio.
As with all investing, there are risks. A number of the companies below trade on premium valuations. When volatility strikes and stock markets inevitably wobble, these shares will take a hit.
But unlike many of the companies above, the Capital Club 10 do have long growth runways ahead. And if you just hang onto this basket, through think and thin over the next three years, I believe they’ll have a good chance of out-performing the S&P/ASX 200 Index.
The Capital Club 10
|ASX Code||Company Name||Share Price|
|ASX:BHP||BHP Billiton Limited||$33.97|
|ASX:MQG||Macquarie Group Ltd||$114.89|
|ASX:REA||REA Group Limited||$89.36|
|ASX:QAN||Qantas Airways Limited||$6.34|
|ASX:NHF||NIB Holdings Limited||$5.82|
|ASX:RWC||Reliance Worldwide Corporation Ltd||$4.80|
|ASX:CGC||Costa Group Holdings Ltd||$7.56|
|ASX:NEC||Nine Entertainment Co Holdings Ltd||$2.35|
You’ll be familiar with most of the company names.
After some tough years, some are going through a purple patch — BHP, Qantas and Nine.
Some are consistent performers — Macquarie, REA and SEEK.
Some are growing quickly — Reliance, Costa and Webjet.
Most have strong, motivated and proven leaders, including NIB.
I’ll be tracking the performance of this mini-portfolio over over the next three years. For the record, the S&P/ASX 200 index trades today at 6,118.
Let the race begin.