What do IBM, Walmart, JPMorgan Chase, and DuPont have in common? Although they are in different sectors, they are all known as 澳洲幸运5官方开奖结果体彩网:blue chip companies. Bluওe chip companies are the mature firms that represent the stalwarts of an industry. These stable, profitable, and long-lasting companies are consi🅠dered relatively safe investments.

What Blue Chip Means

The term "blue chip" originates with the game of high-stakes poker. In poker, gambling chips represent differing dollar values based on their color. White chips are often the least valuable, maybe representing just $1 per chip. Red chips are usually next in line, perhaps worth $5 each. The color blue signifies the chip that has the highest value on the table.

This term was taken from the poker world and put to use as 澳洲幸运5官方开奖结果体彩网:stock market terminology. Blue chip stocks are considered some of the best and safest investments avail✤able. They are seen as leaders in their industries that have remained stable and profitable over their long histories.

Characteristics of a Blue Chip Company

Blue chip companies are usually better prepared to survive during economic downturns due to their consistent revenues and stable growth over time. They are often household names known to the general public, ra🤪ther than just investors or enthusiasts.

In the investment wo🌼rld, a blue chip company has t♍hree traits. A blue chip company is:

• Well-known
• Well-established
• Well-capitalized

Such a company is considered to be a leading company in its sector and produces dominant goods or services. A company may demonstrate one or more of these characteristics but still not be considered a blue chip company if it doesn't show all three.

Well-Established

Many well-known and well-capitalized companies are not yet well-established enou🍌gh to qualify as blue chips. These firms are often involved with new techno🎉logies.

For instance, Facebook (now Meta), had 2.11 billion daily active users at the end of 2023, making it one of the best-known companies on the planet. Facebook also reached a market capitalization of over $1.168 trillion by January 2024, which means it is well-capitalized. However, Facebook didn't even exist until 2004, so it is not well-established enough to be a blue chip company.

Since it was not well-established, Facebook was more likely to be๊ displaced by competitors, broken up by regulators, or fall victim to some other unanticipated disaster.

During recessionary periods, a blue chip company is often less impacted by adverse economic conditions. For exꦇample, Coca-Cola is a blue chip company that might not suffer from a recession b💜ecause many choose to drink its products, regardless of economic conditions.

Blue chip companies have generally demonstrated stable growth rates throughout their history. So, their stocks are considered to have less volatility than other companies that are not well-estab🐲lisꦑhed. Nevertheless, shares of any company can take a hit and lose their blue chip status.

Well-Capitalized

A blue chip firm must also be well-capitalized in at least two ways. First, it must be large enough to make it through a downturn, as noted earlier. The market capitalization of a blue chip company is usually in the billions of dollars. Secondly, a company must have a sufficiently high 澳洲幸运5官方开奖结果体彩网:credit rating to qualify as a blue chip. In particular, the downgrading of a company's debt to 澳洲幸运5官方开奖结果体彩网:junk bond status is sufficient to disqua🍎lify it from being a blue chip.

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 busine🌠sses 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.

The Role of Stock Indexes

A 澳洲幸运5官方开奖结果体彩网:blue chip stock is the stock of a blue chip company. If a stock is considered blue chip, it is generally the market leader or one of the top performers in its sector. Typically, a blue chip stock is a component of major stock market averages and indexes, such as the 澳洲幸运5官方开奖结果体彩网:S&P 500 index in the United State🦋s. It could even be argued that a U.S. stock must be a member of the S&a♚mp;P 500 to be a blue chip.

Generally, a stock is considered a blue chip if it enters the 澳洲幸运5官方开奖结果体彩网:Dow Jones Industrial Average. For example, Apple earned blue chip status when it joined the Dow in 2015. The Dow consists of thirty U.S.-based blue chip companies.

The Bottom Line

Blue chip compan🍬ies are considered reliable leaders in their industries and safe, profitable choices for investors. To be considered a blue chip, a company must be well-known, well-established, and well-capitalized. Blue chip companies must have been in business long enough to have weathered many different economic situations, showing that they can remain stable and profitable as circumstances around them change.

Representation in certain stock indexes is important for determining whet൩he﷽r a stock is a blue chip investment. The Dow Jones Industrial Average is an index of 30 of the largest blue chip stocks in the United States.