Blue chip stocks

Shares in well-established, well-capitalized and well-recognized companies that trade for high prices are commonly referred to as blue chip stocks. There are no universally accepted criteria for exactly what constitute a blue chip stock, so one investor may not necessity agree with another.

blue chipsBlue chip stocks are popular among investors that aim for low-risk and long-term investments. They can for instance be used to form a low risk base in your portfolio, before you start adding more high-risk shares or other financial instruments.

Generally speaking, investors see blue chip companies as likely to successfully weather out difficult times. It is however important to realize that blue chip companies aren’t immune to hardship. Both General Motors and Lehman Brothers were for instance considered blue chip companies.

Examples of blue chip stock companies based in the United States

If you are interested in investing in blue chip stocks you can for instance take a look at the companies on which the Dow Jones Industrial Average index is based. These are all companies based in the United States, and they are all very dominant in their respective fields.

Company Industry
Boeing Aerospace and defense
Nike Apparel
JPMorgan Chase Banking
Goldman Sachs Banking, Financial services
Coca-Cola Beverages
Walt Disney Broadcasting and entertainment
DuPont Chemical industry
General Electric Conglomerate
United Technologies Conglomerate
3M Conglomerate
Cisco Systems Computer networking
IBM Computers and technology
Caterpillar Construction and mining equipment
Visa Consumer banking
Apple Consumer electronics
American Express Consumer finance
Procter & Gamble Consumer goods
McDonald’s Fast food
The Home Depot Home improvement retailer
Travelers Insurance
UnitedHealth Group Managed health care
Chevron Oil & gas
ExxonMobil Oil & gas
Pfizer Pharmaceuticals
Johnson & Johnson Pharmaceuticals
Merck Pharmaceuticals
Wal-Mart Retail
Intel Semiconductors
Microsoft Software
Verizon Telecommunication

Of the blue chip companies above, all are listed in the New York Stock Exchange (NYSE) except for Apple, Intel, Microsoft and Cisco Systems. These four companies are traded on NASDAQ instead.

blue chip stocksExamples of blue chip stock companies based in the United Kingdom

If you want to get ideas for potential blue chip investments in the United Kingdom, the Financial Times Stock Exchange (FTSE) 100 Index is a good place to start. This index consists of the 100 most highly capitalized UK companies listed on the London Stock Exchange.

Here are the 30 most highly capitalized FTSE 100 index companies as of May, 2014.

Company Industry
Royal Dutch Shell Oil and gas
HSBC Banking
BP Oil and gas
Vodafone Group Telecomms
GlaxoSmithKline Pharmaceuticals
British American Tobacco Tobacco
SABMiller Beverages
Diageo Beverages
BG Group Oil and gas
Rio Tinto Group Mining
BHP Billiton Mining
Standard Chartered Banking
AstraZeneca Pharmaceuticals
Barclays Banking
Lloyds Banking Group Banking
Xstrata Mining
Unilever Consumer goods
Reckitt Benckiser Consumer goods
Tesco Supermarket
Glencore International Mining
Anglo American plc Mining
National Grid plc Energy
Prudential plc Finance
Imperial Tobacco Group Tobacco
BT Group Telecomms
Rolls-Royce Group Manufacturing
Centrica Energy
Royal Bank of Scotland Group Banking
Compass Group Food
Associated British Foods Food

The term blue chip stock

The term blue chip stock dates back to the early 1920’s. According to Dow Jones lore, Oliver Gingold was watching the stock ticker at a brokerage firm with Lucien Hooper. At the ticker, some of the shares were selling for over $200 and Gingold told Hooper that he wanted to go back to the office and write “about this blue chip stocks”. The blue poker chip was traditionally the most highly valued at the poker table.

Today, selling for a high value isn’t enough for a stock to be considered blue chip. Most investors will only use the term for shares from well-capitalized, well-established and well-recognized companies with a high share price. Normally, blue chip companies are household names and sell well-known products or services.

A company can be considered a blue chip company without paying dividends, but many of the blue chip companies listed above do have a record of paying stable or rising dividends for years or even decades.