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Is Now The Perfect Time To Buy Vodafone Group plc, National Grid plc And NEXT plc?

The FTSE 100 is at around 6,050, as I write — down over 1,000 points (15%) from its all-time high of April. The sale signs are up, and I’m on the hunt for blue-chip bargains.

Could now be the perfect time to load up with shares of Vodafone (LSE: VOD), National Grid (LSE: NG) and NEXT (LSE: NXT)?

Vodafone

Vodafone’s shares, at 220p, are down 14% from their 52-week high — so, a decline broadly in line with the Footsie’s. However, it is worth noting that the high — at the end of May — was made on the back of speculation that Vodafone was set to receive a takeover bid from US group Liberty Global. The shares fell back somewhat when Vodafone said a few days later that it was in early discussions with Liberty, but only about “a possible exchange of selected assets”.

Despite the 14% fall from the bid-speculation peak, Vodafone remains one of the most expensively-rated stocks in the market. Current-year earnings forecasts of City analysts put the company on an eye-watering price-to-earnings (P/E) ratio of 42; and, while strong earnings growth of 20% is forecast for next year, that only brings the P/E down to around 35. It would take about five years of 20% earnings growth and no change in the share price for Vodafone’s P/E to come down to the long-term FTSE 100 average of 16. As such, I just don’t see the company as a good value proposition at the present time.

National Grid

Defensive businesses, such as utility National Grid, can generally be expected to perform better than the average stock in a falling market. For example, during the 2007-2009 bear market, while the FTSE 100 plunged 48%, National Grid’s shares declined a far less extreme 27%.

The group’s shares have held up relatively well over the past week. Nevertheless, at 834p, they are down 13% from their 52-week high. So, National Grid looks an interesting proposition for investors, as a defensive stock that is well off its peak. Earnings and dividends are expected to tick modestly higher ahead of inflation in the next few years. For the current year, City analysts’ forecasts give a P/E of 14.2 with a dividend yield of 5.3%. For next year, the P/E falls to 13.8, with the yield rising to 5.4%. As such, National Grid looks a good buy to me right now for investors seeking a slow-and-steady core holding for a portfolio.

NEXT

Clothing retailer NEXT has for a long time been one of the best businesses on the high street — both operationally and in delivering value for shareholders. I’m not particularly surprised to see this quality stock, at 7,630p, off a mere 5% from its 52-week high. Performance has no doubt been helped by a trading update at the end of last month in which management upped its sales and profit guidance for the current year.

City analysts’ forecasts put the company on a P/E of 17.6, falling to 16.5 next year. Clothing retailers can suffer the occasional wobble from such things as unseasonable weather, providing investors with an opportunity to pick the shares up more cheaply, but waiting for such an opportunity can be a gamble. In the case of NEXT, a 5% discount from the stock’s recent high and reasonable earnings ratings for a quality business are sufficient to suggest this is a decent buying opportunity.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.