What are Blue Chip Stocks?

Published by Thomas Herold in Investments

The term 'Blue Chip Stocks' is included in the Investments edition of the Herold Financial Dictionary. Get yourself a copy now on Amazon - available as Kindle or Paperback.

A blue chip stock proves to be the nickname given to a stock that belongs to a firmly established company. Blue chip stock companies commonly feature no major outstanding liabilities and incredibly stable earnings track records. These blue chips are believed to be in excellent financial condition, and are commonly referred to as safe investments.

Blue chip company stocks feature many similarities with one another. On the one hand, they are all solidly established as a leader or the leader within their respective fields. They all pay reliable dividends to their shareholders, even if business is not as strong as is typical for them. On the other hand, for literally decades now, investors have thought highly of blue chip stocks in general. Blue chip stocks feature proven track records of solid growth and incredibly high market capitalization. Some examples of blue chip stocks are Coca-Cola, Wal-Mart, McDonald’s, Berkshire Hathaway, IBM, Gillette, and Exxon-Mobile.

Blue chip stocks are occasionally also known as bell weather issues. The name blue chip came from casinos. In casinos, blue chips stand for the highest value chips out of all the various chip colors available.

The origin of the phrase Blue Chip Stock dates back to 1923/1924. At this time, Oliver Gingold of the Dow Jones coined the phrase one day. Dow Jones company history says that Gingold used the phrase for the first time when he stood beside a stock ticker at the firm that eventually became Merrill Lynch. After watching a few stocks trading at $200 to $250 each share and higher, Gingold reportedly said to Lucien Hooper from Hutton and Company that he would get back to his office so that he could “write about these blue chip stocks.” Oliver Gingold’s coined phrase stuck. It has been utilized to talk about successful stocks from that point forward.

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Originally, Blue chip stocks were those that were expensively priced. Today they are more likely the ones that are the highest quality stocks and their associated companies. The financial channels and newspapers will regularly display the performance of blue chip stocks next to the major stock market averages such as the NYSE and the Dow Jones Industrial Average. This is why these blue chip stocks are also known as bell weather issues.

The term 'Blue Chip Stocks' is included in the Investments edition of the Herold Financial Dictionary. Available now on Amazon in Kindle and Paperback.