Blue chip companies – definition and meaning

Blue Chip Companies are businesses that investors see as reliable and profitable. Not only do these companies operate profitably in good times but also in bad times. Additionally, they more likely to survive market fluctuations. In other words, they are large and extremely creditworthy businesses.

A safer option for investors

From an investor’s point of view, blue chip companies are much less risky than start-ups. In fact, we see them as a safer bet than any other public company. They also have a moderate amount of debt.

A blue chip company is famous for the quality and wide acceptance of its products. Additionally, people know it always makes money and pays dividends.

However, there are no formal requirements for being a blue chip.

We call the shares of the largest blue-chip companies large capitalization stocks. More specifically, the stocks of companies with a market capitalization of at least $5 billion.

When many investors sell aggressive growth stocks and purchase blue-chip ones, we call it a flight to quality. This can happen when investors are worried.

Origin of the term ‘Blue-Chip Stock’

The simplest poker betting discs include white, red, and blue chips, worth $1, $5, and $25 respectively. The ‘blues’ have the highest value and are therefore the ones everybody wants.

Historians believe that Oliver Gingold coined the term ‘blue-chip stocks’ either in 1923 or 1924. Gingold was editor of the Wall Street Journal’s ‘Abreast of the Market’ column.

Blue Chip Companies - the expression comes from poker
The term comes from the blue chips we use in poker.

Gingold was standing by the stock ticker at a brokerage company that later became Merrill Lynch. He saw several trades at $200 or more per share. He subsequently said that he would return to his office and “write about these blue-chip stocks.”

Mr. Gingold’s new usage of the term caught on rapidly. Today, it is used by investors across the world to describe quality stocks. In this article, stocks means the same as shares.

These types of companies used to have a long history of sound financial performance. However, today this is not always the case.

Microsoft Corp. and Apple Inc., for example, are blue chip, but they are relatively young companies. In fact, most high tech giants today are less than fifty years old. For example. Amazon.com (founded 1994), Google (founded 1998), and Facebook (founded 2004) are less than 35 years old.

This shift reflects the dynamic nature of the global economy, where technological innovation and market influence can quickly elevate a company to blue-chip status.

Not only does the term refer to companies, but also their shares. Hence, the terms blue chip stocks and blue chip companies.

Blue chip companies

Here are a few American blue chip companies. There are many.

  • American Express Co.: Remains a prominent financial services company.
  • Bank of America Corp.: Continues as a leading banking institution.
  • Boeing Co.: Maintains its status in aerospace and defense.
  • Coca-Cola Co.: Still a major player in the beverage industry.
  • Exxon Mobil Corp.: Continues as a significant entity in the energy sector.
  • Johnson & Johnson: Remains a key healthcare company.
  • JPMorgan Chase & Co.: Continues as a major financial services firm.
  • Microsoft Corp.: Maintains its position as a technology leader.
  • Pfizer Inc.: Still a prominent pharmaceutical company.
  • Procter & Gamble Co.: Remains a leading consumer goods company.
  • Walmart Inc.: Continues as a major retail corporation.
  • Walt Disney Co.: Maintains its status in entertainment and media.

In recent years, several technology companies have risen to prominence and are now often considered blue-chip stocks:

  • Apple Inc.: A leading technology company known for its consumer electronics and software.
  • Amazon.com Inc.: A major player in e-commerce and cloud computing.
  • Alphabet Inc. (Google): Dominates the online advertising market and offers various tech services.
  • Meta Platforms Inc. (formerly Facebook): Operates major social media platforms and invests in virtual reality.
  • Nvidia Corporation: Specializes in graphics processing units and AI technology.

Companies with Changed Status:

  • AT&T Inc.: While still a large telecommunications company, its status as a blue-chip stock has been debated due to recent financial challenges.
  • Citigroup Inc.: Remains a significant financial services firm, but its position among blue-chip stocks has fluctuated.
  • General Electric Co.: Has undergone significant restructuring and is no longer considered a blue-chip stock.
  • General Motors Corp.: While still a major automotive company, its status among blue-chip stocks has been questioned.

UK Blue Chip Companies

  1. Royal Dutch Shell – Energy (Oil & Gas) [Note: Half Dutch]
  2. BP – Energy (Oil & Gas)
  3. HSBC – Financial Services (Banking)
  4. Vodafone Group – Telecommunications
  5. GlaxoSmithKline – Healthcare (Pharmaceuticals)
  6. BG Group – Energy (Oil & Gas)

European Blue Chip Companies

  1. Total – Energy (Oil & Gas) [France]
  2. BCO Santander – Financial Services (Banking) [Spain]
  3. Sanofi-Aventis – Healthcare (Pharmaceuticals) [France]
  4. Volkswagen – Automotive [Germany]
  5. BNP Paribas – Financial Services (Banking) [France]
  6. Siemens – Conglomerate (Diverse Industries) [Germany]
  7. Bayer – Healthcare and Agriculture (Pharmaceuticals and Chemicals) [Germany]

Japanese Blue Chip Companies

  1. Toyota Motor Corporation – Automotive Industry
  2. Sony Corporation – Electronics and Entertainment Industry
  3. Honda Motor Co., Ltd. – Automotive Industry
  4. Mitsubishi UFJ Financial Group – Banking and Financial Services
  5. SoftBank Group Corp. – Telecommunications and Technology
  6. Nippon Telegraph and Telephone Corporation (NTT) – Telecommunications Industry