A blue chip stock refers to shares of a well-established, financially stable and reputable company that has a long history of consistent earnings and dividend payments. These companies are typically leaders in their respective industries and have a strong market presence. Blue chip stocks are considered to be relatively safer investment options as they tend to be less volatile and have a track record of delivering steady returns over time. Many successful long-term investors like Warren Buffett have advocated for investing in companies you believe will be around for a generation or two. The kind of stocks that tend to fit that description are the blue chips that continue to show steady returns.
But since they’ve been around for decades, these stocks have weathered multiple business and market cycles while also delivering a proven track record of growing returns. While there is no precise definition of what makes a blue chip stock, a blue chip stock tends to be a stock of a company that is large, financially sound and has an excellent reputation. McDonald’s sweetens the deal for investors with its dividend best stocks to day trade offering, currently yielding a tad over 2%. Recent revelations indicate the company’s strategic move to raise its royalty fees from 4% to 5% for new U.S. franchisees. These titans represent businesses boasting both dominant market positions and enviable competitive advantages. These aren’t just large corporations; they’re the cream of the crop, commanding a market capitalization north of $10 billion.
This step aims to sharpen McDonald’s competitive positioning and top-line performance. MCG is one of the perennially reliable blue-chip stocks to buy. This fast-food behemoth has pioneered a consistent and replicable customer experience across its outlets, ensuring its patrons enjoy the same quality and ambiance in virtually every part of the world. From its humble beginnings, it now boasts a portfolio of more than 38,000 locations across 100 countries.
The steady demand for electricity that underpins its business, combined with growth in demand for renewable energy, gives NextEra a premium valuation and blue chip status. Nike’s brand power — and the pricing power that comes with it — makes the company a true blue chip. In the third quarter of its 2022 fiscal year, Nike reported year-over-year digital sales growth of 19%, which was an impressive feat considering the company’s massive scale. Nike is targeting half of total revenue to come from online and direct-to-consumer sales within the next couple years. Regardless of whether a blue chip stock has a rapidly growing dividend, the combination of blue chip status and dividend payments can be rewarding for investors. Blue-chip stocks provide a way to invest in stable, good-performing corporations with minimal risk.
- That line-up of necessities insulates PG from downturns–since people keep buying diapers and toilet paper even when times are tough.
- NextEra is one of the largest utility companies in the U.S. and among the largest producers of renewable energy in the world.
- Note that this list does not include every blue-chip stock; it is just intended to be a sample.
- One of the most powerful and recognizable brands in the world, Nike has been a blue chip stock for decades.
- While blue chip stocks are appropriate for use as core holdings within a larger portfolio, they generally shouldn’t be the entire portfolio.
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The 21% decline at the start of the Covid-19 pandemic—one of its steepest declines from the past decade—was the smallest of the companies included on our list. Johnson & Johnson is one of the largest healthcare stocks in the world, developing medical devices, pharmaceuticals and consumer packaged goods. According to a December survey of 38 economists per Bloomberg, there’s a 70% probability the U.S. economy will enter into a recession in 2023.
Should You Invest in Blue Chip Stocks?
This influences which products we write about and where and how the product appears on a page. To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates volatilidad investing products. The stock currently trades at its lowest P/E ratio since 2019, while its forward P/E ratio is even cheaper. It currently trades significantly lower than its all-time high from November 2021.
The drinks and food on your shelf, the hair products in your bathroom, the credit card in your wallet and the shows you watch. Blue chip stocks are reliable, which is why they’re so appealing to investors. Blue-chip stocks are established, financially strong, and consistently profitable publicly traded companies. However, blue-chips are popular among investors, especially older or more risk-averse investors, because of their reliability.
Nike Inc (NKE)
In fortifying your investment portfolio, dipping your toes into the volatile waters of penny and small-cap stocks can be incredibly tempting. However, a seasoned investor would know the unmistakable value of anchoring a portfolio with top-tier blue-chip stocks to buy. Tariq Dennison, is a RIA focused on international clients and portfolios. He shares his on-the-ground experience as an expat investing in diverse foreign markets. Tariq is the author of the book “Invest Outside the Box” and soon-to-be-released “10 Ways To Invest.” He lives in Switzerland, and has worked in Hong Kong, Singapore, Finland, the UK and Canada. I have deliberately left China out of this world tour because I see the opportunities there as too varied and nuanced to include in the scope of a “quick picks” article like this one.
How many blue chip stocks are there?
While that would be bad for your wallet as you’re filling up the gas tank, it will also put Exxon in a position to return to near-record profitability. Revenue for the second quarter was $74.6 billion, up 7% from a year ago. More than $42 billion of that came from Google search revenue. Its dominance is so complete, in fact, that competitors complain it uses unfair tactics such as exclusionary contracts to maintain a monopoly.
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You need to be on the lookout for these things so that you can easily make wise choices. Blue chip is a nickname given to stocks of a well-established and trusted company. These are companies that investors rely on because of their credibility and reliability — industry leaders and household names. These large-cap stocks often have a market valuation of $10 billion or more. Blue chip stocks are the upper echelon of publicly traded companies.
What Is a Blue Chip Stock?
In this article, we’ll explain why there’s never a bad time for investors to buy the blue chips. For all of these reasons, blue chip stocks can make good investments and are among the most popular stock purchases for investors. Some examples of blue chip stocks are IBM Corp., Coca-Cola Co., Microsoft, American Express, McDonald’s, and Boeing Co. The second undervalued technology company on our list of the best blue-chip stocks to buy, ASML stock trades 20% below our fair value estimate. We think management has done an exemplary job of allocating capital, strengthening the company’s competitive and market positions, he adds.
They almost always are large-cap stocks because they’ve matured enough to have a market capitalization of at least $10 billion. There’s nothing wrong with taking a flyer on an up-and-coming stock. Sometimes penny stocks can work, but a good portfolio likely has its fair share of great blue-chip stocks as well to provide a stable foundation. That reliability means blue-chip stocks are less exciting than, say, artificial intelligence or biotech plays. But for the investor who gets nervous about the ups and downs of the market, that’s a great trade-off.
United Airlines also reported averaging more than 2,400 flights per day in the quarter, which is a new high for the company. Since Visa makes its money on transaction fees, the company performs well when spending rises. That’s a good thing, since the economy generally grows more than it contracts. Higher prices raise average transaction values, which in turn generates more fees. UnitedHealth is one of the largest healthcare companies in the U.S., thanks to a string of acquisitions that have added depth and diversity to its operations. The company insures more than 51 million people and expects to add at least one million over the next year.
That massive membership base is a competitive advantage for UnitedHealth, one the company can use to sell more services. UNH is also leveraging technology to improve outcomes and lower costs. Procter & Gamble makes essential Forex moving average household products, things like shampoo, razors, toothpaste, diapers and toilet paper. That line-up of necessities insulates PG from downturns–since people keep buying diapers and toilet paper even when times are tough.
But it’s well off its most recent highs, as this key ratio rose above 40 during the pandemic. Here are a few tips on how to buy blue-chip stocks and build a winning portfolio. Enter your email address below to receive the latest headlines and analysts’ recommendations for your stocks with our free daily email newsletter.