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Diary of a Top Stocker: 5 quality blue chips I've got my eye on

What do you think of the shortlist of Citywire Top Stocks® I've drawn up for our £10,000 portfolio?

 
Diary of a Top Stocker: 5 quality blue chips I've got my eye on

It really is time I got going with the Citywire Top Stocks® portfolio. With the FTSE 100 rallying and the mergers and acquisitions drought seemingly over, I feel I'm missing out on the action and need to put the company’s £10,000 to work.

Admittedly, I’ve been a bit busy with the launch of The Lolly. I hope you like the new section, and I urge you to show it to friends and family if you think they’d find our beginners’ guides and tips useful.

Anyway, to business: I’ve begun to draw up a shortlist from Citywire Top Stocks®, which has just been updated. Do let me know what you think. Now I’m getting down to brass tacks I realise how much you need to know to make a good decision when buying shares.

In other words, I’ve got my finger hovering over the buy button but I’m feeling a bit nervous!

What do you think of technical analysis?

I’d also be really interested in readers’ opinion of technical analysis. One of the strengths of Citywire Top Stocks® is it provides a good list of quality blue chips, many of which have growing exposure to emerging markets, pay chunky dividends and provide a good yield.

A lot of them are pretty fully valued, though, so it does make me wonder how important it'll be to find good entry points, and whether technical analysis – with its slightly bewildering jargon around resistance points, channels and trends – will be a help or a hindrance?

Going for Glaxo

One stock I will almost certainly buy is GlaxoSmithKline (GSK.L). The drugs giant remains our most popular Top Stock, held by four of the five fund managers on our panel. I feel I’ve got to buy if I’m going to honour the whole point of Citywire Top Stocks®, which is to follow what good fund managers do.

Glaxo shares fell yesterday on the company’s full-year results, which showed a 4% fall in sales. As a potential investor, however, I was encouraged to see Reuters report the group ‘is emerging from a revenue trough caused by patent expiries and a slump in sales of diabetes pill Avandia, which was linked to serious heart risks’.

The company’s pipeline of new drugs is also strengthening, with 30 potential new treatments expected to move into late-stage clinical development in the next three years.

The share price has slipped back to yesterday's close of £14.06 over the past month, having surged from £12 to a five-year high of around £15. A price to earnings (P/E) ratio of 12 does not appear outrageous for a company that returned all £5.6 billion of its free cash flow to shareholders last year in dividends and share buybacks, and which yields nearly 5%.

Also on my radar

I've got my beady eye on Vodafone (VOD.L) too. Not only is it held by three of our fund managers, its credentials as an emerging markets play has been boosted by its victory over India’s tax authorities last month. It looks as if its enormous investment in the country could start to pay off.

The share price has been choppy of late, but at yesterday’s close of 175p remains close to a three-year high which is off-putting. However, they do say you have to pay for quality, and with the P/E at a reasonable 10.4 and a well-covered dividend providing a yield of just over 5%, I am interested.

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17 comments so far. Why not have your say?

Keith Hilton

Feb 08, 2012 at 12:48

More like 8 Blue chips, but what's the investing approach going to be i.e. buy & hold, dividend yield, defensive stocks, trading etc ?

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joe stalin

Feb 08, 2012 at 12:52

These safe stocks are in everybody 's portfolio so are very unlikely to materially out perform dull dull dull and unimaginative

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sgjhaghsdg

Feb 08, 2012 at 13:06

I bought all five of those (and 15 more) in the August and September clearance sales. I'm up 10% on (paper!) capital and have a (projected!) forward yield of 5.5% of purchase price. Intended holding time is forever.

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Jn

Feb 08, 2012 at 13:14

I have Vodafone but its share moves like a snail and stops on the way too.

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Anonymous 1 needed this 'off the record'

Feb 08, 2012 at 13:58

Yes this is the time to be looking at these shares...... with the FTSE All Share roaring above 3000, I suppose Gavin has nothing to do except irritate investors.....

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michael kemp

Feb 08, 2012 at 14:59

Boringly safe but yields decent.They could perform well as I suspect market looking to go higher. Couple this with some bond yields,particularly financials,that are looking attractive and returns should be fine.

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Scottino

Feb 08, 2012 at 15:12

I would omit Diageo as it is too expensive against its performance record. GSK is good to its shareholders; 26p final with a special dividend was a surprise. Under 1400p is an excellent buy-in. Ditto for Vodafone and anything under 180p is a good. These are long term hold and add.

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an elder one

Feb 08, 2012 at 18:56

The time to have bought most of these was some time ago I think; prices are likely to be toppy around now; can't see why people are so pleased with GSK, I held them for ages and they bored me stiff going nowhere so I sold them and bought Shire some time ago.

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Jeff of Sidcup

Feb 08, 2012 at 18:59

What a boring article, I wonder who it was written for.

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dpeddlar

Feb 08, 2012 at 21:38

I liked the article, I'm interested in any opinion in stocks I hold and may want to buy (people I mix with aren't into stocks so I get my fix online). I hold BG, Shell, Vodafone, Xstrata, HSBC, Vodafone and some more racy types like Afren, Victrex, Renishaw, Sthree and Spirax Sarco.

Even though I always read that my ftse100 ones 'should be a core holding in any portfolio' I am struggling to hold, specially Vodafone, but may be boring is best - which is something else I read alot. The top stocks feature has brought Devro, DS Smith, Kenmare, IMI and Cookson my attention / watchlist.

The trouble is I already have 20 stocks and my reading usually highlights new opportunities the excite me as above, but it requires new money continue to add companies and also - how many is to many?

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Linda Rushmore

Feb 08, 2012 at 23:15

This is a fine example of 'herd mentality. Surely the author realises that these large blue chips feature in about 85% of all UK Income Funds and Investment Trusts. The first law of stock market investment is not to be influenced by fads and trends. These large stocks are being ruthlessly pursued by income seekers and the prices will eventually be driven up to unsustainable levels. Private investors are always the last to get on the "gravy train" before it hits the buffers. Such selections by a financial journalist smacks of laziness. There are many solid companies out there that are increasingly successful, have much greater potential to grow and increase both their stock value and future dividends.

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John Roycroft

Feb 09, 2012 at 05:36

I sold GSK this week. I also sold National Grid, Standard Life and BP for healthy profits (including dividends). I expect stocks to fall dramatically very soon and will buy them back later.

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Charles Flawn

Feb 09, 2012 at 08:17

What a pity that most of the correspondents above have not realised the basis for the suggestions, ie Citywire Top Stocks, hence the narrow and 'boring' suggestions. They are all very sound companies, pity prices are so high at the moment. wait for Greece to leave the Euro !

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joe stalin

Feb 09, 2012 at 08:23

Linda is absolutely right of course. The fund management industry is just as lazy it would seem as the finacial journalists. As however perormance is judged relative to the industry bench mark there is little incentive to out perform and as such returns have become increasingly mediocre. The same now applies to the hedge funds which have alsoe become trackers in an attempt to stem fund outflows. There are many other dividend stocks which seem to be out of " fashion " with those we pay to generate retuns. RSA, CW and even Interserve all pay handsomely. What about growth should we not take a little risk here? Builders and dare I say even the banks. No maybe we have to wait until they have tripled before the herd dare venture in.

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Steven Medler!

Feb 09, 2012 at 09:57

VOD and GSK look very interesting but the other selections look toppy.

The purpose of the article is to highlight the core stocks which should form part of an income portfolio rather than offer an adventure.

Personally I think BA., CINE, MNDI, REX and TATE offer opportunities to get exposure to other sectors such as packaging and food processing.

Sprinkle a few of these in and get to 15-20 stocks and you will not be far off a long term holding portfolio. This then leaves you free to add a few growth stocks in area you wish to make a judgement call on.

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peter montgomery

Feb 09, 2012 at 16:28

Are you the last remaining marginal buyer of these 'defensive' stocks-ie ex-growth and only increasing eps through cost-cutting,restructuring and buying back equity.What seriously worries me is that the world and his wife owns this stuff to the total absence of'cyclicality or any form of gearing to economic recovery.It may have started-note the economic stats,the comments from Johnson Matthey on US demand,the recent strength in Mondi,DS Smith(and ex-rights!!)Morgan Crucible etc.IF,and I am not going to argue this out in public,my suspicions are bourne out,theres going to be an awful lot of marginal holders of defensive,ex-growth shares looking to move out to ride the recovery-real or imagined.

Watch this space!!

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greville richards

Feb 11, 2012 at 09:38

To slow for me I'm afraid, I took a punt on Kenmare Resources 4 weeks ago and have yield of 10% already, did the same with Supergroup 4 weeks ago which gave a yield of 19% to me....but I was lucky enough to sell them on Tuesday night...it seems to me that these blue chips are very much safe havens, but you need to put your neck on the line if you want to make a sensible return

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