Leading stocks.. everything you should know about these stocks

 Leading stocks.. everything you should know about these stocks


A blue chip is a huge company with an excellent reputation. These are usually large, well-established, financially sound companies that have been in business for many years and have reliable profits. These companies often pay dividends to investors. Blue-chip stocks usually have a market capitalization in the billions and are often the market leader or among the top three leaders in their sector. It is also often a household name. For all these reasons, blue-chip stocks are among the most popular stocks to buy among investors. Some examples of some of the blue-chip stocks are IBM Corp. and Coca-Cola Co. and Boeing Co.

In this article, we will help you understand everything related to this type of stock as well as knowing everything that makes a stock an excellent stock so that you can form the understanding that you will need if you think about investing in this type of stock.

What are the leading stocks?

This type of stock is called Blue-Chip Stocks and the term is believed to derive from the game of poker, where blue chips are the most expensive chips. Blue-chip stocks are generally a component of the most well-known stock market indices such as the Dow Jones Industrial Average, S&P 500, Nasdaq 100 in the United States, the TSX-60 in Canada, or the FTSE in the United Kingdom. The leading stocks in the Saudi market are the 20 largest companies in the market in terms of money and market value, such as Aramco, SABIC, Al-Rajhi and Telecom

While dividend payments are not strictly necessary for a stock to be considered a blue-chip stock, most blue-chip stocks have a long track record of paying steady or increasing dividends. How large a company can qualify for blue-chip status is open to debate. The generally accepted standard is a market capitalization of $5 billion, though market or sector leaders can be companies of all sizes. The regulated fund, called the T. Rowe Price Blue Chip Growth Fund, has no specific guidance for the type of company that qualifies outside of focusing on large- and mid-cap companies that are well-established in their industries even though the average market value of the fund’s holdings has historically been in the range of approximately $100 billion.

basics:

*Blue-chip stocks are large companies with stellar reputations and often include some of the biggest brand names.

* Investors tend to the leading stocks because they have reliable financial resources, and these companies often generate profits.

* There is a widespread perception among investors that blue-chip companies can withstand various types of market challenges. While this may be largely true, it is not foolproof. For this reason, it is essential to diversify the portfolio beyond just blue-chip stocks.

The degree of security of the leading shares:

An excellent company can survive many challenges and market fluctuations, which leads to it being considered a safe investment. But this is not always the case. The bankruptcy of General Motors and Lehman Brothers as well as a number of leading European banks during the global recession of 2008 is evidence that even the best companies can suffer during periods of extreme stress.

Leading stocks as part of a broad and diversified portfolio:

While blue chips are suitable for use as primary holdings within a broad and diversified portfolio, they generally should not make up the entire portfolio. A diversified portfolio usually contains some allocation to bonds and cash. And within the part allocated to shares, the investor should consider owning medium and small capital as well. Younger investors can take the risk that may come with allocating a larger percentage of their portfolio to equities including blue chip stocks while older investors may choose to focus more on capital preservation through more investments in bonds and cash.

What makes a particular stock a leading stock?

Think of blue-chips as the ones you would bring home to meet your parents: they always make a good impression and have the substance to back that impression up. She is stable, responsible and reliable. Blue-chip companies have proven themselves through thick and thin and their stocks have a history of strong performance. Stocks that are considered preferred stocks generally have these things in common:

Large market capitalization: Market capitalization is a measure of the size and value of a company. Blue-chips are often large-cap stocks which usually means they have a market capitalization of $10 billion or more.

*History of Growth: Major companies have a reliable and proven history of sustainable growth and good future prospects. It may not be as flashy as fast-growing technology stocks, but that’s because it’s already well-established.

Market Index Components: The leading stocks are in major market indices such as the S&P 500, Dow Jones Industrial Average, and/or Nasdaq 100.

Dividends: Not all blue chips pay dividends, but many do. Dividends are regular payments made to investors from a company’s revenue. Dividend-paying companies are often mature meaning they may no longer need to invest as much revenue in their growth.

Investing in blue chips is no longer a good deal?

No type of stock should make up the bulk of your portfolio. Diversification, as always, is key when investing successfully and orderly, even if you are investing in companies that are widely considered to be very strong.

Diversification requires that you distribute your money among many types of companies. This means including companies with small, medium, and large market capitalizations as well as companies from different industries and geographic locations.

However, blue-chip stocks are very popular among investors, especially the elderly or risk-averse investors because of their reliability. This does not mean that they are immune to market declines, but it does mean that they have shown a history of weathering these storms and hardships.

Investors also appreciate the dividends that blue-chip stocks usually pay. Dividends are especially attractive if you’re investing for income as many investors do in retirement. Blue-chip stocks pay reliable and growing dividends. 

Some examples of blue chips to consider:

As noted above, blue-chip stocks are generally, but not always, household names. Here is a list of the shares of the leading companies that you may know and that you may take into consideration if you think about investing in the leading shares:
  • 3M (MMM). 
  • Alphabet (GOOGL). 
  • Amazon (AMZN). 
  • American Express (AXP). 
  • Apple (AAPL). 
  • Bank of America (BAC). 
  • Coca-Cola (KO). 
  • Costco (COST). 
  • Disney (DIS). 
  • Goldman Sachs (GS). 
  • Home Depot (HD). 
  • IBM (IBM). 
  • Johnson & Johnson (JNJ). 
  • McDonald’s (MCD). 
  • Microsoft (MSFT). 
  • Nike (NKE). 
  • Starbucks (SBUX). 
  • Verizon (VZ). 
  • Visa (V). 
  • Walmart (WMT).
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