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Blue Chip Stocks
*Last Updated: September 24, 2020
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|Stock||Company||Last Price||Stock Score||Market Cap||P/E Ratio (ttm)||Dividend Yield|
|BABA||Alibaba Group Holding Ltd||$272.95||729.06B||33.57||--||Chart|
|BABAF||Alibaba Group Holding Ltd||$34.00||728.57B||33.54||--||Chart|
|TCTZF||Tencent Holdings Ltd||$66.10||622.5B||46.53||--||Chart|
|TCEHY||Tencent Holdings Ltd||$65.50||620.34B||46.37||0.24%||Chart|
|BRK.A||Berkshire Hathaway Inc||$314,840.00||521.01B||6.57||--||Chart|
|BRK.B||Berkshire Hathaway Inc||$209.61||520.63B||6.56||--||Chart|
|TSM||Taiwan Semiconductor Manufacturing Co Ltd||$77.92||401.14B||35.01||2.04%||Chart|
|JNJ||Johnson & Johnson||$144.44||387.95B||26.17||2.66%||Chart|
|PG||Procter & Gamble Co||$136.31||339.46B||27.49||2.25%||Chart|
Best Blue Chip Stocks To Buy: All investments carry risk, but even the most risk-averse investors know that some uncertainty is necessary to build wealth. The safest assets don’t tend to appreciate in value, which leads to a variety of other issues - in particular, the very real possibility that inflation will eat away at the buying power of your portfolio.
The solution is balance and diversification, which is achieved by including shares of less-volatile, more reliable companies in your asset mix.
While those shares may not deliver dramatic rewards short-term, they offer a bit of security. The underlying companies are large, well-established, and have a long history of steady, consistent growth. Securities in this group are known as blue chip stocks.
What are Blue Chip Stocks?
Poker players will instantly recognize the significance of a company that falls into the blue chip category, as blue poker chips are traditionally the most valuable.
While there is no precise set of criteria that qualifies a company for blue chip status, most investors, analysts, and industry experts agree that blue chips have these characteristics in common:
- Leadership position in the company’s respective market
- Inclusion in respected indexes and/or averages, such as the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100
- Market capitalization of $5 billion or more
- Demonstrated ability to survive and thrive in all sorts of economic conditions
- Established history of steady growth over time
- Stable or increasing dividend payments over many years
These companies also tend to be in a solid financial position, as evidenced by their financial records. For example, most are not saddled with debt, and some have no debt at all.
Debt-to-Equity ratios are steady, and the company realizes higher-than-average returns on equity and returns on assets. In addition, these organizations maintain high levels of liquidity, and in turn, they enjoy investment grade bond ratings.
Considering the strong financials required to be counted among blue chip companies, the next question for most investors is, are blue chip stocks safe?
Are Blue Chip Stocks Safe?
Every stock investment has some level of risk, so it would be inaccurate to say that blue chip stocks are safe.
However, when compared to other, more volatile stocks such as those of startups and those in the biotechnology, oil and gas, technology, and healthcare industries, blue chip stocks are certainly safer.
While there are no guarantees, these are the best candidates for adding stability and reliable income to well-diversified portfolios.
Pros of Investing in Blue Chip Stocks
Stable performance and reliable income are the primary benefits of blue chip stocks, but their value goes a bit deeper. Commercial investors and wealthy private investors rely on these types of securities quite heavily, in part because they deliver results quarter after quarter, leading to increased value over time.
Blue chip companies are large industry leaders, so they tend to be more profitable. They can leverage economies of scale to generate greater returns on their investments, and they can weather the market downturns that inevitably shutter businesses in more precarious positions.
Small individual investors appreciate blue chip companies because related brands tend to be familiar household names like Clorox.
Those with limited experience in the stock market prefer these types of assets, as they have a clear understanding of what the company offers without putting in hours of intensive research.
Cons of Buying Blue Chip Stocks
The biggest disadvantage of blue chip stocks is that they don’t typically experience the sudden dramatic highs that lead to massive short-term profits.
These are mature companies that have passed the rapid growth phase, and their strategy tends to rely on slow, steady expansion.
That may include acquisition of complementary businesses or the addition of supply and distribution chain capabilities, as well as careful steps into new consumer markets.
While blue chip stocks can generally be counted upon to increase in value over time, and they tend to pay higher-than-average dividends, investors won’t see the sorts of gains that come with startups that are disrupting industries with new technologies and improved solutions to long-standing consumer issues.
In other words, blue chips typically do not exceed the results of the larger market, and in fact, they tend to move in lockstep with major indexes. Given that those indexes are made up of the same blue chip stocks, this is a logical outcome - but it doesn’t help when investors are looking for big rewards.
Best Blue Chip Stocks To Buy
Most blue chip stocks are a smart addition to a well-balanced portfolio, but chances are you don’t plan to open a position in dozens of companies.
Narrow down the selection with this top ten list of blue chip stocks that are particularly good investments in the current market:
Berkshire Hathaway Has Gained 2,744,062%
Warren Buffett is one of the best-known names in investing history. Also known as the Oracle of Omaha, Buffett has an extraordinary ability to select the biggest winners, regardless of market conditions.
His annual shareholder letter is chock-full of savvy advice for investors, and many consider it as valuable - if not more valuable - than the investment guides churned out by analysts and industry experts week after week.
Buffett invests through his holding company, Berkshire Hathaway, which trades on the New York Stock Exchange.
Its track record speaks for itself. From 1965 to 2019, the S&P 500 averaged an annual return of 10 percent, and it increased by 19,800.
Berkshire Hathaway [BRK.A], on the other hand, averaged annual returns of 20.3 percent, and it has increased by 2,744,062 percent in the same period.
So far, 2020 hasn’t been a stellar year for Berkshire Hathaway, and there is a possibility that this will be one of the few years that stocks don’t deliver the value investors have come to expect.
On the bright side, share prices have dropped, which presents an extraordinary opportunity for those looking to round out their portfolios. By any measure, this blue-chip stock is a must-have, particularly at today’s lower-than-usual prices.
J&J Has Made Long-term Investors Rich
Johnson & Johnson [JNJ] is a prime example of the sort of maturity you can expect from blue chips.
The company has been in business for more than 130 years, and it has succeeded through economic disasters from the Great Depression of the early 1930s to the Great Recession of 2008.
Its ability to survive all sorts of market conditions stems, in part, from its product line. Johnson & Johnson is a trusted name in consumer health products, medical devices, and pharmaceutical products.
On the financial side, Johnson & Johnson has had the stable, consistent returns and growing dividends that are a hallmark of blue chip companies.
It achieved revenues of $20 billion or more per quarter for each of the last 10 quarters. Few of its competitors can say the same. In fact, from a stock growth perspective, Johnson & Johnson has delivered returns that exceed those of the larger market, which is not very common among blue chips.
By one calculation, if you had invested $10,000 in Johnson & Johnson at the time of its IPO in 1944, your investment would have grown to $98.6 million today.Clearly, the company is doing many, many things right.
All of that is to say that Johnson & Johnson is a solid choice for blue chip investors for the moment. However, those holding Johnson & Johnson shares should keep an eye on company news.
There have been a number of well-publicized legal claims against the organization. These haven’t caused any serious issues for shareholders quite yet, but if new legal issues come up or existing suits gain traction, there is a possibility that Johnson & Johnson shares could lose some of their blue chip shine.
Procter & Gamble Is A Blue Chip Millennials Like
The sheer number of brands that roll up to Procter & Gamble [PG] is somewhat awe-inspiring - and that’s true even after the company began streamlining in 2014.
At the time, while still successful, it had become so large as to be unwieldy, and business leaders determined that they could generate better results with more attention to a smaller number of brands.
Staples like Tide and Gillette are still part of the Procter & Gamble family, and the company has injected new life into its businesses.
Gone are the stodgy old marketing techniques. Instead, Procter & Gamble [PG] has transformed into an innovative market leader that appeals to Millennial and Gen Z consumers - the ones that are most critical to the company’s on-going success.
Both sales and profitability are on the incline, showing the sort of slow, steady growth one expects from a blue chip.
While it’s true that Procter & Gamble had its detractors a few years ago, most analysts and industry experts have now placed this stock squarely in “buy” territory.
Clorox Has Embraced The Digital Revolution
There isn’t anything terribly exciting about bleach. Most people have a bottle or two in their homes, and it serves as a reliable solution to mess, dirt, and germs.
Of course, when it comes to investing in blue chip stocks, Clorox [CLX] is a smart choice for that very reason.
Clorox is a household name that consumers trust for the cleaning supplies that are a staple in every home, business, and institutional setting.
Because Clorox produces a long list of must-haves, it doesn’t face the same exposure to market conditions that other blue chips experience.
No matter how tight money is, you can count on consumers to continue buying cleaning and other household maintenance products.
A more interesting point is that Clorox doesn’t rest on its laurels knowing it will sell cleaners under just about any circumstances. Instead, it constantly has an eye on innovation, and it actively monitors consumer habits to develop easier, more convenient cleaning tools.
Better still, Clorox has embraced the digital revolution, though some might argue that there isn’t a need to have a social media relationship with your bleach company.
Clorox is focused on constant enhancement of the customer experience, always building brand loyalty to ensure continued value for shareholders.
Colgate Palmolive Prioritizes Dividends
Colgate Palmolive [CL] is in a similar position to Clorox, in that it produces household products that aren’t especially exciting, but they certainly are necessary.
Toothpaste and dish soap are always in demand, and they tend to be the sort of products that people choose once and then buy over and over again.
One of the most interesting aspects of Colgate Palmolive’s success is its reach into emerging markets. It has made a point of developing brand loyalty among consumers who are seeing their income rise.
Because these products tend to inspire brand loyalty, Colgate Palmolive’s early entry into these markets puts it leaps and bounds ahead of any competitors that might turn up in coming years.
Finally, Colgate Palmolive is particularly popular among income investors, because it places a priority on dividends.
The company has paid dividends since 1895, and it has raised the amount of dividends at least once a year for 57 consecutive years.
Coca Cola Dividend > S&P 500 Dividend
Few brands command the sort of global name recognition that Coca Cola [KO] enjoys. The soft drink is woven into American culture to the point that most people who were around for 1985’s New Coke debacle remember it clearly - and still have passionate feelings about the company’s attempt to adjust its classic formula.
Berkshire Hathaway, with 400 million shares, is a major Coca Cola investor. In fact, the holding company owns approximately 9.3 percent of the company’s outstanding stock. Earning Warren Buffett’s stamp of approval is no easy feat, and it puts this blue chip at the top of the buy list.
Though Coca Cola suffered in 2020, few industry experts fear long-term damage to the business. Most investors have elected to ride the storm out with their Coca Cola shares in hand, knowing that revenue is likely to rebound relatively quickly.
One of the biggest benefits of an investment in Coca Cola is the generous dividend payments. At the end of April 2020, dividend yields were calculated to be approximately 3.6 percent, which is significantly higher than the S&P 500’s average 2.1 percent.
If history is any guide, that gap will continue to climb. Coca Cola has increased dividends annually for 58 consecutive years, demonstrating the priority the company places on rewarding shareholders. Those in search of blue chip stocks that generate income can’t go wrong with Coca Cola.
Walmart Is A Sales Behemoth
At this point, there is no doubt in anyone’s mind that Walmart will survive the apocalypse. No matter what challenges the market brings, this company comes out on top.
When measured by sales, Walmart is the biggest company in the world, and it uses its massive buying power to stay ahead of the competition.
Sales volume is so large, it is easily able to drive inventory costs down, resulting in lower prices for consumers and larger per-item profits for the business.
Revenue, profit, and earnings per share have gone up steadily for the past 20 years, and that growth is expected to continue in both the short and long term.
In fact, most predictions put Walmart’s annual growth at an average of 5.6 percent per year, making Walmart stock a solid addition to any portfolio.
JP Morgan Thrived After The Last Crash
There are several commercial banks that make the blue chip list, but in terms of assets, JP Morgan is the largest financial institution in the United States.
However, that’s not the reason blue chip investors look at this stock first. Aside from its long history of success, JP Morgan did something remarkable.
When the world economy crashed in 2008, JP Morgan was able to recover quickly.
It capitalized on its strong position while other financial institutions struggled, giving it the opportunity to excel in the ten years that followed, unlike many of its peers.
In short, those looking to realize profits from the financial services industry often look at JP Morgan first, because it has shown its strength through devastating economic conditions.
Visa Relies On Consumers Buying But...
It’s true that Visa [V] hasn’t fared well over the past few months. Its revenue relies on people making purchases, and that sort of activity came to an abrupt halt when the coronavirus locked down nations around the world. However, you don’t buy blue chips for short-term gains.
Based on its history, its brand, and the future of the industry, Visa is almost guaranteed to rebound.
Consider this: over the past ten years, Visa has managed to achieve operating profit margins of 50 percent or more. In recent years, those margins have often gone over 60 percent. A few quarters of suppressed economic activity are unlikely to leave a lasting mark on the company’s financials.
The biggest opportunity Visa and its investors are anticipating is the continued trend towards digital payment solutions.
Cashless payments are growing more popular every day, and because Visa is a trusted global brand, consumers are quick to trust digital payment options backed by the Visa logo.
Microsoft Embraced The Cloud, And WonThere are very few companies that can count themselves as pioneers of the digital age, but Microsoft is among them. It was partially responsible for bringing desktops into homes and businesses, and business leaders have made it a priority to stay on the cutting edge of innovative technologies.
Now that businesses are moving away from packaged software and turning to the cloud, Microsoft is demonstrating its ability to adapt and innovate by leading the industry in this latest transformation.
The challenges of 2020 decimated many companies, including some of the most reliable blue chips. However, Microsoft was perfectly situated to succeed under the current conditions.
As businesses moved workers home, they turned to the brand they know best - the one with the right tools and services to make that transition smooth. While the rest of the market is still trying desperately to recover from the March crash, Microsoft has posted growth.
Microsoft might not be the only game in town when it comes to cloud-based technology, but it is the company with the most specialized experience in this space. That bodes well for investors in search of safer options for their battered portfolios.
How To Invest in Blue Chip StocksSetting up an account so you can invest in blue chip stocks is simple, now that low-cost, high-quality brokerages like tastyworks operate online.
You will be asked for basic identifying information, as well as an initial deposit to fund your new account. Funds transfers can be made electronically by connecting your bank account with your brokerage account.
Once your funds are available to use in trades, a process that may require up to three business days, select the stock you wish to purchase, as well as the number of shares.
Next, use the tool to specify whether you want to place a market order or a limit order. Market orders are executed as soon as administratively possible, and you pay whatever price is effective at the time of the trade.
Limit orders offer a bit more protection, as you can specify the most you are willing to pay per share.
This is an important technique to keep in mind when the market is particularly volatile. While blue chip stocks don’t tend to see sharp price changes on their own, the larger market can be impacted by global events, which in turn may cause blue chip pricing to move quickly over a short period.
A limit order ensures you won’t be surprised by an expensive trade if there is a price change between the time you place the order and the time it is executed. If prices exceed your limit, the order is not processed.
Online brokerage accounts are able to offer low-cost or no-cost trades, because they don’t have the expenses that traditional firms face. Specifically, they don’t hire licensed professionals to guide you through your trades.
The good news about buying blue chips is that you don’t necessarily need professional advice. You already know the company quite well, and any additional information you need is readily accessible through online sources.