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Blue chip (stock market)
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A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. The term derives from casino, where blue chips stand for counters of the highest value. 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 of 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 $10 billion.) Examples are Royal Dutch Shell (petroleum), The Coca-Cola Company (food), American Express (financial services), IBM (information technology) and Procter & Gamble (consumer goods). The now defunct company Enron was once considered a blue chip stock.
Somewhat similar terms include:
Bellwether
The stock of a company recognized as a leader in its industry. For example, IBM is considered a bellwether stock in the computer industry. Often, the performance of a bellwether is an indication of how that industry is doing as a whole.
Large cap
These are companies with extremely large market capitalization, or "market cap", which is the product of the number of shares outstanding and the price of the stock.
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