ASX 200 shares are often seen as more reliable compared to smaller shares because they already have been operating for many years and are (probably) generating positive cashflow.
However, I don’t think it’s worth buying the largest businesses in the ASX 200 such as Commonwealth Bank of Australia (ASX: CBA) because size can be a problem for generating market-beating returns.
That’s why I think these three mid ASX 200 shares could offer the best combination of growth and reliability:
Brickworks Limited (ASX: BKW)
Brickworks is one of Australia’s leading property materials businesses in my opinion with a stable of high-quality brands like Austral Bricks and Austral Masonry. It has been operating for over 80 years.
The business is diversified in that it has three (or four) divisions: building products, land & development and investments. The latter two could provide a good alternative source of earnings during periods of low construction activity. The fourth could be described as US building products.
I’m quite excited by the idea of Brickworks’ expansion into the USA with its Glen Gery acquisition.
It’s currently trading at 15x FY20’s estimated earnings.
Xero Limited (ASX: XRO)
Xero is one of the world’s leading cloud accounting software providers, some might consider it the best in the world.
The company has very high levels of recurring revenue, it’s growing subscriber numbers strongly across most of the countries it operates in and it has just started generating free cash flow and a profit.
The bigger Xero becomes the higher its profit margins go, making each new subscriber more profitable than the last.
Xero isn’t trying to make a profit yet, so it’s hard to say it is valued at any multiple of profit.
Crown Resorts Ltd (ASX: CWN)
Australia’s largest casino and entertainment complex business is facing a bit of negativity after a failed takeover offer and a selldown by James Packer of his share holding.
However, I still believe Crown Resorts could be good value at around $12 (or under) considering Crown Sydney is getting closer to completion every month.
An Australian recession wouldn’t be too pretty for Crown, but longer-term I expect regulars and VIPs alike will continue walking through Crown’s doors and outlaying money.
Crown is currently trading at 20x FY20’s estimated earnings.
There are compelling reasons to buy each of these ASX 200 blue chips at today’s price, particularly with interest rates falling. However, Brickworks would be my first choice due to its reliable dividend and potential for US growth.
These exciting ASX blue chips could also be compelling long-term buys at today’s prices.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019