Blue-chip stock

Quick definition

A blue-chip stock is a huge public company with a great reputation. 

Key details

• Blue-chip stocks generally have a market capitalisation of over $10 billion generated by securing a leading position in their chosen industry and years of strong financial results.
• They tend to be listed in some of the world’s leading market indices such as the FTSE 100, S&P 500 and Dow Jones Industrial Average.
• Investors often flock to blue-chip stocks in times of economic uncertainty; they are viewed as safe havens for people to park their capital.

What is a blue-chip stock?

They are stocks of companies with a long-standing history of quality, reliability and profitability. Some of the world most well-known brands are blue-chip stocks, and they have the reputation and implicit value to remain attractive to investors even when overall market conditions turn sour. 

Essentially, when you think ‘blue-chip,’ think high-quality. Stocks of this type have an extended track record of delivering earnings growth and shareholder value. While they may lack the high-risk excitement that comes with more speculative growth stocks, they possess the ability to deliver steady, consistent long-term growth, and they often offer dividends too.

Given the strength of their balance sheet, sizeable market share and experienced leadership, blue-chip stocks usually hold up better than other stocks in the event of a bear market. However, they remain a key part of the centralised financial system, and if macro conditions take a turn for the worse, they can still lose substantial value. Crucially, they are in a good position to eventually recover to past glories in such circumstances.

So, if you are looking for a stock investment that is less risky than most to occupy a significant portion of your portfolio, blue-chip stocks could be for you. However, if you are looking for a true safe-haven investment that is truly insulated from negative impacts to the conventional financial system, you would be better off looking at something more off-the-grid like gold or cryptocurrencies. 

Examples of blue-chip stocks

Here are a few of the most popular blue-chip stocks to invest in right now.

Alibaba Group (BABA)

Founded in 1999, Alibaba has been one of China’s leading technology companies for many years. It combines online retail and internet services with other technology and is valued at over $300 billion. The public company’s financial muscle and consistent performance means it is without question a blue-chip stock. 

Johnson & Johnson (JNJ)

JNJ has been around since way back in 1886, and in the years that followed its IPO in 1944, it cemented itself as one of the top pharmaceutical companies on the planet. While other companies struggled to maintain their value during the COVID-19 market correction, Johnson & Johnson continued to grow. In part, this was down to the company’s headline-grabbing vaccine, though its resilience was also a product of its blue-chip credentials.

Facebook (FB)

It is highly likely you have heard of Facebook, and you are probably a user too. The social media conglomerate went public in 2012 and quickly grew into one of the largest and influential blue-chip stocks on the market. The company demonstrated the fortitude of blue-chip stocks when it staged a huge comeback following the COVID-19 market pullback. 

McDonald’s (MCD)

Just writing this is making me hungry. With over 37,000 locations in 120 countries and 2 million employees, McDonald’s is the largest restaurant chain in the world and a certified blue-chip stock. Like Facebook, McDonald’s was able to flourish despite difficult economic conditions. 

How do I find blue-chip stocks?

You can look for blue-chip stocks yourself by searching for stocks based on parameters like market cap, earnings per share, and revenue growth. If you’d rather cut straight to the chase, we have penned a list of the best dividend stocks to buy right now. Check it out and see which companies suit your goals. 

Where can I learn more?

Make sure you check out our stock, cryptocurrency, or commodities hubs for the latest, in-depth advice on investing and trading.