2 blue-chip stocks I plan on doubling my money with

These stocks are recognised as blue-chip for a reason and here’s why I think they’re worth the extra cash.

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Blue-chip stocks are those that have a reputation for quality, reliability and the ability to produce a secure and constant profit, no matter what the economy (including whatever Brexit can throw at them, hopefully). However, this stamp of approval usually comes with a pretty high price tag.

Having said this, here are two blue-chip companies that stand out to me as stocks very much worth investing in, as high-quality businesses.

Still growing

Taylor Wimpey (LSE: TW) has been on the rise this year despite concerns surrounding the housing market thanks to Brexit and the expected end of homebuilder-boosting government schemes. The share price has already risen by 30% in the first few months of 2019, a strong performance that seemed to surprise investors and analysts due to the risks in the market.

Taylor Wimpey is a long-established company with a huge market cap of £5.5bn, with analysts predicting a steady rise in profits of 3.9% this year. But despite the share price rise, the stock is currently priced at 157p with a P/E ratio of only around 8. This means that much of the risk in the housing market is already in the price and TW is certainly a stock that can provide long-term benefits, including a high dividend and strong financial backing with a cash pile of £2.4bn.

It’s currently offering investors a dividend yield of over 10%, which is one of the highest returns in the FTSE 100. Such a high yield usually means investors are expecting a dividend cut and the shares are priced accordingly, but given its pre-tax profits of £810.7m in 2018, Taylor Wimpey looks like it can sustain this. It has dividend cover of 2.36 and a healthy track record of payments. Despite political uncertainty, there is still a high demand for homes. CEO Pete Redfern said of Q1: “We are achieving a record sales rate and building a solid forward order book for the year“. I think the company should be able to continue to pay big money through next year too. I’d buy.

Shopping for the future

Ocado (LSE: OCDO) always seems to have been one step ahead of other online retailers when it comes to innovation and technological advancements. Automation at its warehouses is even more advanced than some of Amazon’s most recently-built facilities and many investors believe it’s worth putting money on the company for the tech alone.

That said, Ocado has a huge P/E ratio of almost 170 and the company remains loss-making. But had I bought the stock in 2017, I would now have gains of 460%. I believe it’s worth being patient with the share as the company is growing with a market valuation of nearly £10bn.

In February, Marks & Spencer agreed a £1.8bn partnership with Ocado to sell M&S groceries on Ocado’s popular shopping website. This deal has opened up huge opportunities for the e-tail specialist, giving it access to all of M&S’s grocery and supplier relationships. This mammoth deal also gives Ocado the resources to invest in yet more game-changing technology and it’s now looking into indoor vertical farming to take its grocery technology and sales to the next level.

I would consider investing in this stock for the long term as the developing technologies mirror the retail industry’s shift online. Online food shopping sales have doubled in recent years and Ocado remains a key player.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

fional owns shares of Marks & Spencer Group and Ocado Group. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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