Guide to the best Blue Chips actions

Posted by Md Khann on January 23rd, 2020

Are you not sure how blue-chip companies and their actions can influence your investments? This guide offers the overview you are looking for, as it illustrates the best blue-chip stocks to invest in. We will start from the beginning, explaining what blue chips are. This guide also illustrates the best European and British blue-chip stocks, the highest dividends for blue-chip stocks and general investments in blue-chip stocks.

blue chip what are they

Blue Chip Companies - The details

Only a handful of companies can be considered as a real "blue chips" company or stock, but before explaining when they "qualify", let's talk first about the meaning itself. The fact that a stock is considered one of the "blue-chip companies" can vary from investor to investor, as it depends on your individual assessment. Having said that, there are a few criteria that experts agree on. Here are the three main aspects to analyze if a company can be considered a blue-chip company.

The blue chips stocks come from companies:

Known: These companies should be (relatively) known to the public or investor and are often considered to be a "popular" name.

Safe: the securities of these companies are relatively safe investments because they tend to perform relatively well during periods of economic boom and empowerment. The company's finances are also stable.

Stable: these stocks are often included in the main stock market indices, both in the United States and in other world indices. It goes without saying that these companies have been operating for years and often for decades.

The main characteristic of a blue-chip company is its dominance in a particular sector thanks to its large market share and a well-recognized brand. There is no formal list of companies recognized as blue chips, but the 30 stocks of the Dow Jones Industrial Average (DJIA) are often seen as adequate examples. Among the best-known companies of the DJIA which are mostly considered as blue-chip shares are some of the best known: Apple, Boeing, Caterpillar, Coca-Cola, IBM, Goldman Sachs, Exxon Mobil, Intel, McDonald's, Microsoft, Nike, Visa, Walmart, Walt Disney. source https://www.australiaeta.com.sg/

These Blue chip companies have very high market capitalization levels, which indicate the total value of the company (number of shares multiplied by the current share price). Market capitalization levels are around billions, and can even reach trillions. In fact, Apple was the first company to reach a trillion dollars in 2018, causing important titles in various newspapers around the world.

Invest in Blue Chip

Investing in blue chips stocks are considered one of the safest options for investors, due to the dominant market positions, the market cap, the size, the financial position and the solid reputation of the companies. These stocks often also offer stable earnings, stable earnings growth (rate of change), stable dividend payments and sometimes even stable dividend growth.

The best blue-chip stocks have long experience in paying dividends to investors. Some investors, like Ben Graham in his book "The Intelligent Investor", prefer a 20-year payment track record. All these advantages make blue chips stocks very attractive for small, medium and large investors. But this does not mean that these are immune from recessions and economic crises.

WYATT's investment research has made a comprehensive assessment of the equity performance of three large and well-known US companies: AT&T, General Electric (GE) and EI DuPont (DP). WYATT compared the performance of these three companies with the overall stock market during the two most famous and largest market crashes of the 20th century, which occurred in 1929 and 1987.

As can be seen from the table above, the main advantage is that blue-chip stocks are historically more resistant (their losses were lower) and can recover faster. For the three titles mentioned above, it took only two years for them to return to their initial values ​​after the collapse of 1987.

blue chip companies

Source: Business Insider This chart illustrates the performance of the stock market between 1927 and 1932, including the stock market crash between 1929 and 1932 - Please note: past performance does not indicate future results, nor is it an indicator reliable of future performance.

Although blue-chip stocks are more resilient, this does not rule out that some companies are leaving the industrial average Dow Jones (DJIA) or that new companies are on the list. Furthermore, there are no publicly known official criteria for making this choice. The only guideline available offered by the DJIA committee is that an action is added when a company has an "excellent reputation, demonstration of sustained growth and interest in more investors".

Among the most renowned and well-known changes that have occurred in the past 5 years are

some of the best known:

When the Walgreens Boots Alliance replaced General Electric in 2018. When Apple replaced AT&T in 2015. When Goldman Sachs, Nike, and Visa replaced Alcoa, Bank of America and Hewlett-Packard in 2013. Now that we have made it clear what blue chips are, let's move on to see some of the most interesting stocks for our investment portfolio. 

The best European Blue Chip Stocks

The European equivalent of the Dow Jones Industrial Average could be considered the Dow Jones EURO STOXX 50 index. This list could represent the best known European blue chips. The index covers Europe in general, the euro area and Eastern Europe.

If you are interested in trading with blue-chip stocks, it may probably be beneficial for you to trade with Admiral Markets' CFDs. You can trade CFDs on the world's most popular blue-chip stocks, and benefit from movements in any direction. Trade with all types of companies around the world, including Apple, BT, CitiGroup, Google, Facebook and many more! The top 15 Dow Jones EURO STOXX 50 companies are listed here. The sequence is decided by the weight that the title has in the index:

Nobody knows for sure if these companies will remain in the top 15 in a few years or if all these companies will be able to navigate without damage through financial and economic storms. But what can be said is that these European blue-chip stocks are mature, well-known and industry leaders. As an investor, it is worth considering these securities in your portfolio. Even as a trader, these stocks tend to have lower volumes and higher price volatility, which in turn opens the door to more trading opportunities.

Blue Chips - The best English Blue Chip Stocks

The UK's blue chips stocks are listed on the FTSE 100 index, which is short for the Financial Times Stock Exchange. It is made up of 100 companies and is based on the UK's largest capitalization companies.

Here is a list of ten companies that are typical examples of UK blue-chip companies:

Invest in blue-chip stocks

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what are blue chips

The best Blue Chip companies of 2020

Now that we have seen what blue chips are and have mentioned some of the most relevant names in this sector, we cannot miss advice on looking for the best blue chips stocks to keep an eye on in 2020. Although these lists are interesting information and offer good starting points for your search, it is certainly not advisable to blindly follow the advice of one of the top five or ten lists. The best course of action is always to conduct thorough and personal research. In addition, it is best if this research is based on a list of criteria that you believe are essential for an investment portfolio or a well-balanced trading approach. With that said, there are many ways to find recommendations when searching the internet.

Here is a list of 3 blue-chip companies that might be worth considering:

Cisco Systems (NASDAQ: CSCO). In recent years, Cisco has continued to add new features to its service platform and has recently unveiled new conversational artificial intelligence interfaces. The addition of continued demand for data centers and ongoing 5G updates makes Cisco an interesting name.

Merck (NYSE: MRK). For some years Merck has been focusing more on new biotechnology and advanced drugs for the fight against cancer. This move turned out to be the right one. Merck's Keytruda has become one of the reference drugs for a variety of lung cancers with significant growth rates.

American Express (NYSE: AXP). Amex is interesting for its attention to the higher end of the credit spectrum, which eliminates many of the uncertainties and problems related to the offer of loans and where the reduction of default rates could play a significant role in the medium term, with a debt sharply increasing, especially in the United States.

A lot of advice on this topic can also be found on the Internet, but it is always important to conduct adequate analyzes for each blue-chip stock, especially when trying to obtain higher dividend returns. Often a higher dividend rate indicates lower share price growth, but there are some blue-chip stocks that manage to offer an interesting combination, where decent dividend rates are paired with decent growth rates. Here are four blue-chip actions that managed to beat the odds.