blue chip brands: Blue chip companies definition and meaning

How big a company needs to be to qualify for blue chip status is open to debate. A generally accepted benchmark is a market capitalization of $10 billion, although market or sector leaders can be companies of all sizes. JPMorgan is an American multinational investment bank and financial services company that was founded in 1871 by John Pierpont Morgan. The company provides a wide range of financial services, including investment banking, asset management, and private banking. JP Morgan is considered one of the largest and most reputable financial institutions in the world.

The color blue signifies the chip that has the highest value on the table. This term was thus taken from the poker world and put to use as stock market terminology. The term “blue chip” comes from the game of poker, where blue chips are usually the most valuable ones on the table. It was first used by Oliver Gingold, an employee at Dow Jones, who observed that certain stocks reliably traded above $200 per share. Nowadays, some blue chips trade in the thousands per share.

These companies have strong fundamentals that make them some of the highest value stocks. For example, many companies have pricing power means that allows them to pass along increased producer costs to the consumer. This means that the companies are more likely to retain their operating margins, which will typically translate to more stable earnings. In addition to receiving dividends, many blue chip stocks give investors the ability to reinvest their dividends. Reinvesting dividends is a solid strategy that can boost total return and deliver the benefit of compounding.

But Berkshire also owns a diverse set of businesses such as restaurant chain Dairy Queen, railroad giant BNSF, and its Berkshire Hathaway Energy utility company. With such a broad range of businesses, the company has a reputation for safety and security, as well as consistent performance. Blue chip stocks can be appropriate for the core holdings of a large portfolio. A diversified portfolio usually has some allocation of bonds and cash, in addition to stocks.

Real-time analyst ratings, insider transactions, earnings data, and more. However, these companies have loyal consumers that are willing to seek out their brands at the expense of their competitors. MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.

Advantages and Disadvantages of Blue Chip Stocks

These high-growth upstarts aim to be the blue chip stocks of tomorrow. Some companies meet the well-known and well-established criteria but are not well-capitalized enough to be blue chips. These are usually older firms that have fallen on hard times. In 2020, several very well-known and well-established retailers were in this unfortunate category. Sears and JCPenney were both household names with well-established businesses stretching back over a century. However, they fell far short of being well-capitalized enough to be blue chip companies due to years of decline.

He has covered investing and financial news since earning his economics degree from the University of Maryland in 2016. But J&J is a true healthcare giant, making a wide array of medical devices to help doctors and other medical professionals perform life-saving procedures. Johnson & Johnson also has a vast pharmaceutical business and produces drugs such as the arthritis treatment Remicade, prostate cancer drug Zytiga, and psoriasis drug Stelara. Pays dividends to shareholders and regularly increases its payouts.

Characteristics of Blue Chip Stocks

Here is a list of our partners and here’s how we make money. Steven Nickolas is a freelance writer and has 10+ years of experience working as a consultant to retail and institutional investors. When investing in ETFs, it is important to research the underlying holdings, expense ratios, and other details before investing. However, there are no formal requirements for being a blue chip. Analyst consensus is the average investment recommendation among Wall Street research analysts.

Nike is one of the world’s largest suppliers of athletic shoes and apparel and is considered a leading brand in the industry. The company’s products are sold in over 190 countries and its signature “Just Do It” slogan is widely recognised globally. Blue-chips are popular among investors for their reliability, though they’re not immune to market downturns.

A blue chip stock is a large, financially-sound, nationally-recognized and well-established business that trades on public markets. Blue chip companies usually sell high-quality and broadly-used products and services. They are known for their long-term track records of stable and reliable growth, helping them operate profitably regardless of current economic conditions. Blue chip companies have solid business models and impressive track records of returns for investors. These returns often include regular and growing dividend payments, making blue chip stocks among the most popular for conservative investors. But even more risk-tolerant investors should consider buying blue chip stocks to better diversify their portfolios and provide some stability during turbulent stock market conditions.

Chevron is an American multinational energy corporation that was founded in 1879. The company engages in oil and gas exploration, production, refining, and marketing. Chevron operates in over 180 countries, and it is considered one of the largest oil and gas companies on Earth. Nike is an American multinational corporation that was founded in 1964 by Bill Bowerman and Phil Knight. The company designs, develops and sells footwear, apparel, and accessories.

Johnson & Johnson

Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week. When you open a new, eligible Fidelity account with $50 or more. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.

No one type of stock should make up the bulk of your portfolio. Diversification, as always, is key when investing, even if you’re investing in companies that are widely considered rock-solid. 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. Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for over 15 years, and was a senior writer and spokesperson at NerdWallet before becoming an assigning editor.

Blue chip companies – definition and meaning

They can offer capital preservation and consistent dividend payments for income and protection against inflation. Blue chips are characterized by a large market capitalization, a listing on a major stock exchange, and a history of reliable growth and dividend payments. Mastercard is an American multinational financial services corporation that was founded in 1966. The company operates a global payment system that enables businesses and consumers to make electronic transactions. Mastercard’s products and services include credit cards, debit cards, and prepaid cards. The company is considered one of the leading payment processors in the world and its brand is widely recognised globally.

This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly. Investors also appreciate the dividends blue-chip stocks typically pay.

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. A blue chip firm must also be well-capitalized in at least two ways.

Best Online Stock Brokers for Beginners

Neither the author nor editor held positions in the aforementioned investments at the time of publication. Blue-chip stocks are in major market indexes like the S&P 500, the S&P 100, the Dow Jones Industrial Average and/or the Nasdaq 100. A large-cap index fund or ETF is a good way to get exposure to blue-chip stocks. Most blue-chip stocks are part of a large-cap market index like the S&P 100, Dow Jones Industrial Average or Nasdaq 100. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

But diversification also means broadening your sector exposure. One way to do this is to find mutual funds and exchange traded funds that specialize in blue chip stocks. However, just about every investor can benefit from having a portion of their portfolio invested in blue chip stocks. It doesn’t have to be a set percentage; different investors will have different viewpoints about how much risk they want to assume. It’s important to note that Berkshire Hathaway is the only blue chip stock on this list that doesn’t pay a dividend.