Blue chip

From Free net encyclopedia

Tortilla chips made from blue corn are another kind of "blue chip".

A blue chip stock is the description of the stock of well-established companies having stable earnings and no extensive liabilities. Most blue chip stocks pay regular dividends, even when business is faring worse than usual. They are valued by investors seeking relative safety and stability, though prices per share are usually high. Typically, such stocks are perceived to offer reliable returns, low-yield, and low-risk. Many blue chips are components in popular indices, such as the Dow Jones Industrial Average and the S&P 500.

Alternately, blue chip stocks are sometimes defined as companies whose stocks have large market capitalization values (for example, over $1 billion.)

The term comes from the blue-colored chips, which are typically the most valuable in the game of poker. Examples are Royal Dutch Shell (petroleum energy), The Coca-Cola Company (food) and IBM (information technology).

The following are two more terms with the somewhat similar meaning:

Bellwether 

Is the stock of a company, which is recognized as a leader in its industry. For example, IBM is considered a bellwether stock in the computer industry. Often times, the performance of a bellwether is an indication of how that industry is doing as a whole.

Large Cap 

These are companies who have extremely large market capitalizations. Market cap is the product of the number of shares outstanding and the price of the stock.

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