What is a blue-chip company in simple terms?
Blue chip companies are stable, profitable companies that are seen as safe investments in their industries. The term "blue chip" comes from the game of poker, where blue chips are the highest-value pieces. A company must be well-known, well-established, and well-capitalized to be a blue chip.
What is a blue chip company? A blue chip is a company that is recognised nationally for its positive reputation and high-quality product or service. Blue chips are successful businesses that can be trusted to perform well and operate profitably even under adverse market conditions.
"Blue chip" is an informal term for the most reliable and valuable companies on the market. These are usually companies with a long track record of financial stability. They are usually leaders within their industry.
Blue chip stocks are the stocks of dependable, profitable companies that have stood the test of time. Investing in high-quality blue chip companies can be a way to strengthen your stock portfolio. Apple, Berkshire Hathaway, Coca-Cola, Johnson & Johnson, and American Express stand out as top blue chip stocks.
Amazon joins other blue-chip companies on the Dow index.
Kids Definition
blue chip. noun. : a stock issue that has a high value because of public faith in its worth and stability. also : a company that issues such stock.
Blue chip companies tend to be free of debt, and most blue chip companies offer favourable dividends to their shareholders. Examples of blue chip companies in the UK include HSBC, Unilever, Tesco, Vodafone and AstraZeneca. Globally, blue chip companies include The Coca-Cola Company, IBM, and Disney.
Stocks that are considered blue-chip stocks generally have these things in common: Large market capitalization. Market cap is a measure of the size and value of a company. Blue-chip stocks are often large-cap stocks, which typically means they have a market valuation of $10 billion or more.
There is no official list of blue chip stocks. However, generally speaking, investors consider a member of the Dow Jones Industrial Average to be among the bluest of the blue chips. There are 30 blue chip stocks using this strict measure, since there are 30 companies in the Dow Jones.
Alphabet (GOOG, GOOGL): Alphabet's non-search AI potential makes it a must-own blue chip for the long haul.
Is Coca-Cola a blue chip?
Coca-Cola is the quintessential blue chip stock, a drinks company that has demonstrated decades of consistent dividends and stable performance.
Blue-Chip Stocks to Buy: McDonald's (MCD)
McDonald's (NYSE:MCD) has raised its dividend payment every year since 1976. Yet MCD stock has struggled in recent years. Year-to-date (YTD), the share price is down 6%. Over five years, it is up only 45%.
Netflix (NASDAQ:NFLX) is an American content streaming service that is available by subscription in over 190 countries around the world. This blue-chip stock currently trades at a slight premium to its average analyst price target.
What do IBM, Walmart, JPMorgan Chase, and DuPont have in common? Although they are in different sectors, they are all known as blue chip companies.
PepsiCo (PEP)
This has been one of the top performing blue-chip stocks as of late. PepsiCo made a nice push to all-time highs, hitting $196.88 on May 15. It was up about 9% on the year and up 17% from the 2023 low. However, shares have quickly shed their value since those highs.
As a small example, Costco Wholesale (NASDAQ:COST) has trended higher by 226% (capital gains) in the last five years. This has led to this list of blue-chip stocks under $20.
The problem is that despite being included in blue chip ETF indexes, companies like Nvidia and Tesla aren't truly blue chip stocks, George Pearkes, an analyst at Bespoke, told CNN. They're much more volatile.
A blue-chip stock tends to be trusted by investors, partly because it will have a large market capitalisation. They are the opposite of penny stocks, which tend to have a lower, less stable price and do not pay dividends as regularly.
Most investors view blue chip stocks as an elite group. They're the best-known, best-established, and best-capitalized publicly traded companies in the world.
Perhaps an outsider like Peltz and his people is needed to give Disney the agility it needs to march higher again. This makes it one of those blue-chip stocks to consider.
Who makes blue chips?
Some of the most famous blue-chip companies among investors include Apple, Boeing, Caterpillar, Coca-Cola, ExxonMobil, Johnson & Johnson, Procter & Gamble, and Verizon.
Microsoft (MSFT): This blue-chip AI stock is the largest company in the world by market capitalization.
Slow Growth Rate
Since the businesses of blue chip companies are already mature, they have little future growth potential. This can limit their ability to appreciate in value over time.
Potential Risks and Considerations
The value of their stock may fall during severe economic downturns. fluctuations in Interest Rates: Blue Chip stocks are susceptible to fluctuations in interest rates, which can effect borrowing costs and profitability.
Small Cap Stocks have much greater volatility (oscillation) than top-line shares (the so-called Blue Chips). Given this context, more conservative traders choose to trade Blue Chips while riskier traders usually prefer Small Cap options, precisely because of their oscillation.
