Why are Blue-Chip Stocks so popular? How to find them?
When you think of fundamentally strong and technically sound companies, what names usually pop up in your head? You aren’t wrong if you thought of Reliance Industries, TCS, Hindustan Unilever, or any trailblazer company with an enviable market standing that has proven to be a multibagger stock over the past few years. Such well-established market leaders with stellar financial records that are easily recognisable among the thousands of companies on the stock exchange are known as ‘blue-chip companies’, and the stocks they issue are ‘blue-chip stocks’. The term ‘blue-chip’ derives from the game of poker where the bluecolored chips have the highest value. This article delves into the meaning and popularity of blue-chip stocks and how you can pick the best ones. What are blue-chip stocks? Blue-chip stocks are the stocks of companies with an outstanding reputation. Such companies have huge market capitalisation, steady earnings, strong financials, usually pay attractive dividends to their investors, and have longrunning market operations. Furthermore, blue-chip companies are typically market leaders or occupy a dominant position in their sector. They are resilient
against adverse market conditions and continue to grow profitably even during periods of economic downturn. Read more about best blue chip stock Characteristics of blue-chip stocks When you are looking for blue-chip stocks, you can use the following characteristics to identify them: Blue-chip stocks are large or very large-cap stocks. They are usually prominent market leaders or stock market giants in their respective sectors. Blue-chip companies have a long history of steady returns and consistent performance. Blue-chip companies are financially resilient with zero or negligible debt levels. Such companies have a track record of surviving economic slowdowns and show promising growth prospects. Blue-chip companies are typically diverse with multiple sources of revenue. This feature serves as a buffer against losses and operational setbacks. Most importantly, blue-chip stocks are stable, low-risk stocks and are ideal for investors with long-term goals.