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.

Cambridge Online Dictionaries has the following definition for blue-chip:

“A blue-chip company or investment is one that can be trusted and is not likely to fail.”

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. (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.

US blue chip companies

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

  1. American Express Co. – Financial Services (Credit Services)
  2. AT&T Inc. – Telecommunications
  3. Bank of America Corp. – Financial Services (Banking)
  4. Boeing Co. – Aerospace and Defense
  5. Citigroup Inc. – Financial Services (Banking)
  6. Coca-Cola Co. – Consumer Goods (Beverages)
  7. Exxon Mobil Corp. – Energy (Oil & Gas)
  8. General Electric Co. – Conglomerate (Diverse Industries)
  9. General Motors Corp. – Automotive
  10. Johnson & Johnson – Healthcare (Pharmaceuticals and Consumer Goods)
  11. JPMorgan Chase & Co. – Financial Services (Banking)
  12. Microsoft Corp. – Technology (Software and Services)
  13. Pfizer Inc. – Healthcare (Pharmaceuticals)
  14. Procter & Gamble Co. – Consumer Goods (Household and Personal Products)
  15. Wal-Mart Stores Inc. – Retail (General Retailers)
  16. Walt Disney Co. – Entertainment and Media

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. Nokia – Technology (Telecommunications Equipment) [Finland]
  7. Siemens – Conglomerate (Diverse Industries) [Germany]
  8. 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

2 Videos

These two videos, from Marketing Business Network, our sister channel in YouTube, explain what ‘Blue Chip Company’ and ‘Blue Chip Stocks’ are, using straightforward and easy-to-understand language and examples.

  • What is a Blue Chip Company?

  • What are Blue Chip Stocks?