Blue-chip stocks: What are they and what are the best examples on the ASX?

Blue-chip stocks are amongst the most desired stocks on the market. But what are they and what are the best examples of them – on Wall Street and the ASX?

What are blue-chip stocks?

Blue-chip stocks tend to be large, well-established and financially sound companies. These stocks are often industry leaders and typically have a long history of steady and reliable growth.

They are characterized by their high quality, stability and low risk of default, making them attractive investments for most investors. Blue-chip stocks generally pay dividends that can provide investors with additional income and often appreciate in value over time.

Additionally, these stocks are closely watched and tracked by market analysts since they are often seen as indicators of the overall health of the global economy.  

Blue-chip stocks tend to be in a variety of different sectors but they tend to be in well-established sectors with a long history of growth and success, making them attractive investments for most investors.  

What are some of the best examples of blue-chip stocks?

Some of the most popular blue-chip stocks include Apple, Microsoft, Amazon, JPMorgan Chase, and Johnson & Johnson. These companies are all well-established and respected names in their respective industries, with a long history of growth and success. Apple has been one of the world’s biggest tech companies since the introduction of its first iPhone in 2007.

Microsoft is a leader in the software industry and offers many popular products like Windows 10 and Office 365. Amazon is an e-commerce giant that has revolutionized how people shop online.

JPMorgan Chase is one of the largest financial services companies in the world, providing banking services to millions of customers around the globe. Finally, Johnson & Johnson is a leading healthcare company that manufactures a wide range of medical products and treatments.

All of these stocks have consistently provided shareholders with reliable returns over time, making them attractive investments for investors looking for steady income or long-term capital gains. 

What about Australian blue-chip stocks?

Australian blue-chip stocks typically refer to stocks of large, well-established and financially sound companies.

Examples of such companies include the so-called Big Four Banks, BHP, Rio Tinto, Telstra and the major super markets – Woolworths and Coles. 

These companies are known for their strong balance sheets and ability to remain resilient during times of economic uncertainty. But there is no hard and fast rule about which ones are and which ones are not, even if some companies are almost always included on this list. 

The Big Four Banks are well known blue-chip stocks given they record amongst the highest profits and pay the highest dividends of any Australian shares.

The major miners, particularly BHP and Rio Tinto possess a reputation as blue-chip stocks too. Their share prices can be volatile given the fluctuation of commodities, but not to the same degree as companies with just one commodity like Fortescue. They also record amongst the highest profits of any ASX company and pay high dividends. 

Woolworths and Coles, the largest food retailers in Australia, are also blue-chip stocks because they perform in all economic conditions. 

Some would include successful high growth companies like Xero (ASX:XRO) and Pro Medicus (ASX:PME) in this category, while others would not. Some would argue these companies are established companies now and have earned their place at the top. Others may argue their industries are too volatile and cyclical – we’re not going to delve into the merits or shortcomings of that argument here except to note that there are two sides to that debate.

Keep your eye on blue-chip stocks

Once again we note, there is no body that determines if a company is blue-chip stock or not. 

But they tend to be large, well-established and financially sound companies, are often industry leaders and typically have a long history of steady and reliable growth. And so they should be amongst the top stocks to consider for those new to investor or those wanting to minimise their risk. Those looking for higher returns, particularly in the shorter-term, may be better off elsewhere. 

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