The Capital Club Daily: Why the outlook for ASX blue chips looks decidedly bleak


What’s the big deal?

The AFR says L1 Capital fund manager Mark Landau is finding it very hard to find any ASX blue chip stocks worth buying.

He says the companies in the ASX 20 are largely not growing, including the big four banks, Telstra Corporation (ASX:TLS), Woolworths (ASX:WOW) and Wesfarmers (ASX:WES).

His assessment of the banks was particularly harsh, saying they face “all sorts of pain in the next few years.”

What does this mean?

The Capital Club largely agrees with Mr Landau that future returns for many of the popular ASX blue chips will be mediocre.

How bad?

UBS analysts told a Sydney audience on Thursday that given current stock market valuations, history suggested investors should expect returns of 3.1 per cent a year (on average) over the next 10 years.

That’s not much more than what you can earn in a term deposit.

What should you do?


If you’ve got too much of your portfolio in Commonwealth Bank of Australia (ASX:CBA) and/or Westpac Banking Corp (ASX:WBC), consider diversifying into other companies or funds.

For ASX 200 stocks to buy, the Ellerston Australian Share Fund has recently added to its existing positions in five companies.

For smaller companies, the Spheria Australian Microcap Fund has named two companies trading on what look like insanely cheap valuations. One of them even trades on a 9.3 per cent fully franked dividend yield.

A portfolio should hold up to 20 individual company names, and be diversified across sectors. Having 60 per cent of your portfolio in the big four banks doesn’t count as diversified.

On the flipside, you can be too diversified. Holding 100 companies is too many. Holding 20 funds — which in turn each hold around 50 companies — is too many.

Cut your losers. Reinvest in your winners. Add new positions, over time.

I’m gunning for around 10-12 per cent per annum returns (on average) over the long-term. You should too.

But sitting in the popular ASX blue chips isn’t going to get you over the line, no matter how juicy the fully franked dividends. 

Here’s how you can strike it rich in the share market…

The best way to strike it rich in the share market is to buy shares that are not only cheap, but growing quickly.

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Best of all, the report is absolutely free, exclusively for readers of The Capital Club.

In this comprehensive free report, you’ll find the name of one ASX gold stock that’s not only profitable, but trading at less than 4 times forecast profits.

You’ll also discover the name of a company one fund manager has called the cheapest stock in the ASX 100, and you’ll read about the three catalysts that could push the share price higher in the next six months.

Finally, the report names one of the cheapest retailers trading on the ASX, a company that just picked up the assets of a distressed competitor on the cheap, paying just 2 times earnings. No wonder one top fund manager thinks its share price could at least double.

With the share prices of each of these 3 companies having the potential to double or more, you’ll want to act now. Simply click here or the button below, enter your email address, and this free report will be instantly sent to you.

See the 3 stocks

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at