Blue chip stocks

blu chipThe phrase blue chip stock was coined by Oliver Gingold of Dow Jones in the early 1920’s. Back then, a blue chip stock simply meant a high-priced stock, a reference to how many poker establishments used the color blue for their most valuable chip. According to Dow Jones folklore, Gingold was watching the stock ticker at a brokerage firm (that would eventually become Merrill Lynch) together with Lucien Hooper of W.E. Hutton & Co. Noticing how several companies had shares selling for $200 or $250 a share or more, Gingold told Hooper that he intended to go back to the office to write “about these blue-chip stocks”.

Today, being high-priced isn’t enough for a stock to be called blue chip. Although there is no legally binding definition of the term, most investors will only consider well-established and well-recognized stock companies with sound finances as blue chip stock companies. Blue chip stock companies will typically sell widely known products and services and have a reputation of being reliable.

Investing in blue chip stocks

Blue chip stocks are regarded as less volatile than other stocks and investors often assume that blue chip companies will get through harsh economic times better than non-blue chip companies. When an investor wants to increase the stability and long-term steady growth of a portfolio, investing in blue chip stocks is common.

The stock price of a blue chip company tend to follow the S&P 500 stock market index.

stockDow Jones Industrial Average

The Dow Jones Industrial Average is an index known for following select group of U.S. blue chip companies. It shows a price-weighted stock-price average of selected U.S. blue chip companies generally acknowledged as leaders in their respective fields.

At the time of writing, the Dow Jones Industrial Average consists of the 30 U.S. companies listed in the table below. As you can see, many of these companies have been a part of the index for a long time without interruption, with General Electric being added in the year 1907, ExxonMobil (then Standard Oil of New Jersey) in 1928 and Procter & Gamble in 1932.

Company Exchange Symbol Industry Date added
General Electric NYSE GE Conglomerate 1907-11-07
ExxonMobil NYSE XOM Oil & gas 1928-10-01(as Standard Oil of New Jersey)
Procter & Gamble NYSE PG Consumer goods 1932-05-26
DuPont NYSE DD Chemical industry 1935-11-20(also 1924-01-22 to 1925-08-31)
United Technologies NYSE UTX Conglomerate 1939-03-14(as United Aircraft)
3M NYSE MMM Conglomerate 1976-08-09(as Minnesota Mining and Manufacturing)
IBM NYSE IBM Computers and technology 1979-06-29(also 1932-05-26 to 1939-03-04)
Merck NYSE MRK Pharmaceuticals 1979-06-29
American Express NYSE AXP Consumer finance 1982-08-30
McDonald’s NYSE MCD Fast food 1985-10-30
Boeing NYSE BA Aerospace and defense 1987-03-12
Coca-Cola NYSE KO Beverages 1987-03-12(also 1932-05-26 to 1935-11-20)
Caterpillar NYSE CAT Construction and mining equipment 1991-05-06
JPMorgan Chase NYSE JPM Banking 1991-05-06
Walt Disney NYSE DIS Broadcasting and entertainment 1991-05-06
Johnson & Johnson NYSE JNJ Pharmaceuticals 1997-03-17
Wal-Mart NYSE WMT Retail 1997-03-17
The Home Depot NYSE HD Home improvement retailer 1999-11-01
Intel NASDAQ INTC Semiconductors 1999-11-01
Microsoft NASDAQ MSFT Software 1999-11-01
Pfizer NYSE PFE Pharmaceuticals 2004-04-08
Verizon NYSE VZ Telecommunication 2004-04-08
Chevron NYSE CVX Oil & gas 2008-02-19(also 1930-07-18 to 1999-11-01)
Cisco Systems NASDAQ CSCO Computer networking 2009-06-08
Travelers NYSE TRV Insurance 2009-06-08
UnitedHealth Group NYSE UNH Managed health care 2012-09-24
Goldman Sachs NYSE GS Banking, Financial services 2013-09-20
Nike NYSE NKE Apparel 2013-09-20
Visa NYSE V Consumer banking 2013-09-20
Apple NASDAQ AAPL Consumer electronics 2015-03-18

blue chip stocks

The Dow Jones & Company was formed by Charles Dow, statistician Edward Jones and journalist Charles Bergstresser in 1882. Their first market index was the Dow Jones Transportation Average, dating back to 1884. The Dow Jones Average was first published in 1885, while the Dow Jones Industrial Average followed in 1896.

Today, the industrial portion of the name Dow Jones Industrial Average is largely there for historical reasons, since many of the 30 companies currently on the list has little or nothing to do with traditional heavy industry.