Blue chip

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

A blue chip stock is the stock of a well-established company 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 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 $1 billion.)

The term comes from blue-colored chips in the game of poker, which are typically the most valuable. Examples are Royal Dutch Shell (petroleum), The Coca-Cola Company (food) and IBM (information technology). Before its total collapse in 2001, Enron was considered blue chip stock.

The term "blue chip" is also commonly used to describe collegiate athletes who are being targeted for recruitment (drafting) by professional sports teams. "Blue chip" players have proven themselves to be amongst the best at their respective positions in their sports and are more sought after by professional teams than other players.

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.

External Links

[Investing, Stocks and Blue Chips]

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