5 British blue chips for your portfolio

Investors who want to diversify could do well to look overseas for stability and versatility.

By Benzinga Jul 11, 2014 2:39PM
Credit: © Stefan Wermuth/Reuters
Caption: The logo of AstraZeneca is seen on a medication packageBy Jonathan Yates

Investors should naturally be thinking risk management and protecting gains in this record bull market for the Dow Jones Industrial Average ($INDU) and the Standard & Poor's 500 Index ($INX).


An effective way to accomplish this is by diversifying holdings with British blue chips such as Unilever (UL), AstraZeneca (AZN), BHP Billiton (BBL), BAE Systems (BAESY) and Rosslyn Data, a software firm active in the cloud and big data.


Other British stocks can be good diversifying plays as well, such as Audioboom, and Litebulb Group. Like Unilever, a consumer goods firm with many familiar brands such as Vaseline and Lipton, Litebulb Group sells consumer products around the world. Audioboom has a global reputation as the "YouTube of Radio."


Unlike AstraZenaca and Unilever, which can be bought on The New York Exchange, these must be bought through an account with brokerage firm such as Charles 

Schwab (SCHW)or E*Trade (ETFC). The commission can be higher but that is worth the cost due to the better execution on the local market for these stocks.


British stocks have several very timely aspects for American investors.


Many of the stocks trade at lower valuations. That is especially true for those over-the-counter like BAE Systems. It is even more so for that have to be bought through the London Stock Exchange. With the Dow Jones Industrial Average and Standard & Poor's 500 Index up, that is an important consideration.


Another appealing feature is that the options can be better priced.


A previous article highlighted the appeal of writing covered call options on BHP Billiton. That applies for other British stocks, too. Dr. Joseph Louro, an options expert and head of Investview (INVU), an investor education and financial technology firm, pointed out that writing options is a low risk strategy as the great majority never go exercised.


That makes British stocks even more appealing as it adds another source of income.


More from Benzinga
5Comments
Jul 11, 2014 4:47PM
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"Many of the stocks trade at lower valuations."

Economy ::United Kingdom
GDP (purchasing power parity):   
$2.387 trillion (2013 est.)

Debt - external:   
$9.577 trillion (31 December 2013 est.)

They have far worse Debt issues then the United States. If you are going to take Risks, you might as well do it right here with Global American Companies.


Jul 11, 2014 6:28PM
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I'm with you, Dave. Their major banks are on the ropes and they have no sustaining employment. Odds are against the British Empire surviving intact by 2016. 
Jul 12, 2014 3:13PM
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"An effective way to accomplish this is by diversifying holdings with British blue chips...Many of the stocks trade at lower valuations..."

The diversification is a smart move ONLY if you understand the British economy and it's market sectors as well as you do those in the USA or trust a mutual or ETF UK-sector or UK-based fund manager to do so.

Lower valuations?  As other commenters mention, there may be good reason for that and suggests the article was written without an understanding of the UK situation.  The two stocks that trade on the NYSE trade at high valuations: AZN has a P/E of 45.7 and a 5% dividend, but it's consensus 5-year eps growth rate is 1.2% per year.  UL has a P/E of 19.7 and a nice 3.4% dividend, but it's consensus 5-year eps growth rate is 1.5% per year.  And note that if the market matched the experts growth projections, it would have to return an avg. 15% per year, so 1.5% or less projected growth


This article's lack of discussion as to why the British stocks are valued lower makes one suspect the necessary understanding of the British market may be lacking.
Jul 12, 2014 3:23PM
avatar
If you want to consider investing in the UK, check out:
http://www.thisismoney.co.uk/money/investing/index.html

Currently there are two interesting articles there about investing in British companies:

http://www.thisismoney.co.uk/money/diyinvesting/article-2653104/The-10-FTSE-100-shares-Buffett-style-moat-protected-enemy-invaders.html

http://www.thisismoney.co.uk/money/investing/article-2652974/Rule-Britannia-Five-Best-British-shares-investment-portfolio.html

Neither one mentions any of the stocks mentioned here.  The first mentions one pharma stock with a Buffett-type durable competitive advantage: GlaxoSmithKline (NYSE: GSK) which has a P/E of just 15.3, a fat 4.7% dividend, and the consensus annual eps growth rate for the next 5 years is 8.3% - 5.5x and 7x the projected growth rates of the two higher P/E, NYSE-listed stocks in this article!

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