Working in the securities market, traders or investors face high risks associated with the uncertainty of further market changes. The ability to generate high returns is inextricably linked to taking significant risk. In the process of work, all available measures are taken in order to reduce it. However, there is a group of companies on the stock exchange whose shares have been steadily growing for not only years, but also decades. For the owners of such securities, the risk of losses becomes minimal. This quality is important, but not the only one in order to classify a company as a blue-chip company. It is important that at the same time she regularly pays dividends, successfully develops the business and has some other characteristics.The steady rise in value over the years and the payment of rewards to the holders make these securities very attractive to long-term investors.
The term blue chips comes from the name of high value casino chips, which are traditionally made blue in the United States. The analogy between casino chips and the safest company stock ends when the same color is mentioned. In most cases, such securities can be considered as the least risky exchange-traded assets.
Blue Chips can be seen as market leaders in their country. In addition, they characterize the level of economic health of the state. Usually their shares are listed in the index of the leading exchanges. With an increase in this indicator, they conclude that the national economy is growing steadily, and with a decrease in value, they draw a conclusion about a slowdown in development and look for its reasons. Often, blue chips are referred to the first tier of securities, which are compared in terms of key indicators with the second and third.
The blue chips of the American stock market with an estimated return of more than 20 percent [/ caption] Compared to them, the second tier is slightly inferior in terms of its economic characteristics, but has shares with significantly less liquidity. There is a relatively small amount of securities issued by them in circulation, which creates additional opportunities for price manipulation. If companies deem it necessary, they can stop paying dividends and use all funds to develop the business.
- Signs of blue chips
- Strengths and weaknesses of US blue-chip stocks
- How investors deal with blue-chip stocks
- Blue chips of the American stock market – which stocks show positive dynamics at the end of 2021
- Johnson & Johnson
- Berkshire Hathaway Inc
- JPMorgan Chase & Co
- 3M Co
- The walt disney co
- How to Buy US Blue Chip Shares
Signs of blue chips
There is no precise and formal criterion that would allow a company to be categorized unambiguously. However, in most cases, it is clear to everyone who is being included in a particular country. In most cases, these include companies that are included in the indices of the most important exchanges of a particular country. For example, in the US we will talk about the S & P500. In most cases, the blue-chip category includes firms with the following characteristics:
- Significant capitalization indicates a more reliable financial position of the company. Specific requirements may vary from country to country.
- Good liquidity makes it easy to buy or sell such securities. The free-float parameter is associated with this characteristic. It expresses the volume of shares that are freely traded on the exchange market. If it is large, then this indicates the availability of securities for investors.
- Regular high volume of daily trading .
- Stable financial performance over the years .
Blue Chips always have transparent accounts that are published openly. Anyone who wants can make their own opinion on the characteristics of the business.
blue chips of the American stock market in many ways coincide with the companies that have the largest capitalization [/ caption]
Strengths and weaknesses of US blue-chip stocks
Working with shares of such companies, you can take advantage of the following benefits:
- You can count on their high liquidity because there is always a demand for them.
- In this case, speculators have very limited opportunities to manipulate prices.
- Working with these shares, investors in most cases receive a steady income over the years from the growth in value and thanks to regularly paid dividends.
- A relatively smaller spread is used in transactions. This makes transactions with such securities more profitable for both short-term and long-term investors.
- The stability of dividend payments makes it possible to count on the fact that their value will not decrease significantly in the future, but will most likely remain at the same level or increase slightly.
- Smoother price movement reduces the risks of transactions with such stocks.
US blue chips with permanent dividend payments [/ caption] During crises, there is a high probability that blue chips will retain their economic stability. When working with blue chips, one should take into account the following disadvantages:
- Although the risks are minimal when working with them, they nevertheless exist. However, although such securities can cause losses, there is a high demand for them, which makes it easy to find buyers for them, allowing you to exit the transaction with minimal losses.
- The high demand for such shares leads to the fact that they bring insignificant profits, and also here, as a rule, they pay relatively small dividends.
- While there is a small likelihood of a stock collapse, it is nonetheless possible. To avoid problems of this kind, you need to closely monitor the fundamentals.
- It cannot be ruled out that the company will leave the exchange.
It is almost unbelievable to spot market events driving blue-chip stocks exploding. As a rule, they grow slightly, but steadily over a long period of time.
How investors deal with blue-chip stocks
Changes in quotes for these securities are smoother. This makes them promising for both beginners and experienced investors. Methods of both fundamental and technical analysis can be used to predict possible price movements, but the former are considered the most effective. Blue chips are especially beneficial for long-term investors. In most cases, they demonstrate long-term gradual growth and at the same time pay dividends on a regular basis. The stable and long-term growth of the business allows us to count on its continuation in the future, however, when working with these companies, it is necessary to constantly monitor the fundamental indicators. This avoids surprises (such as stock crashes) that are possible even in this case.
In portfolio investment, it is important to ensure the most rational portfolio composition. Moreover, it must contain a certain proportion of extremely reliable shares. Usually they try to keep it at the level of 30% -35%, but the exact value is determined by what type of portfolio is used.
TOP-20 American companies by capitalization – with and without dividends [/ caption]
Blue chips of the American stock market – which stocks show positive dynamics at the end of 2021
The following is a more detailed discussion of some of the most significant American companies that have earned the right to be considered blue chips by their many years of activity. Each of them is described why they are considered the most significant in the US economy. Is it worth investing in US blue-chip companies: https://youtu.be/1z3EBspzAFM
Johnson & Johnson
This company is engaged in the production of goods from the consumer and medical sectors. It is known for being well diversified. The company was founded in 1886. Now the value of its capitalization is $ 747 billion. The three largest rating agencies have given this company the highest possible AAA rating. It should be borne in mind that the government of the United States has such a rating provided by only two of them. The amount of dividends paid is 2.4% per annum. The average annual rate of return is 15% -16%.
Berkshire Hathaway Inc
The capitalization of this company has reached $ 650 billion. This investment company demonstrates high stability not only during periods of economic growth, but also during serious economic crises. Investors, purchasing its shares, receive a return from the beginning of the year, which is 23%.
JPMorgan Chase & Co
With a capitalization of $ 474 billion, this bank is the largest in the United States. In the second half of the year, it showed significant growth, which is explained by the recovery of the American economy after the pandemic. At the same time, the use of debit and credit cards is growing rapidly, and the volume of loans issued is increasing. During the year, the bank demonstrated a profitability of more than 24%.
This industrial giant is worth $ 110 billion. The company was founded in 1902 and has been growing since then. Its branches in the fields of transportation, electronics and healthcare have been particularly successful over the past year. The company is known for its strategy that products manufactured in the last 4 years accounted for at least 30% of sales. She considers even the personal projects of employees to be important, giving at least 15% of the working time to work on them. The firm pays dividends in the amount of 3.1%. The profitability since the beginning of the year is at the level of 13% -14%.
The walt disney co
This giant of the entertainment industry began its work in 1923. The company’s development has slowed down in recent years due to the crisis caused by the pandemic. Now it is rapidly recovering its position. For example, the number of subscribers to video services Disney +, ESPN + and Hulu has reached a total of 173 million people and continues to grow.
YTD profitability was -3.3%, but the economic recovery after the crisis is expected to strengthen the position of the company, which is still among the US blue chips. US
blue chips 2021 – list of shares with prices and growth [/ caption]
How to Buy US Blue Chip Shares
To gain access to American blue chips, you can use the following options:
- Securities of the most significant US companies are available through the St. Petersburg Stock Exchange . Here you can find stocks of firms included in the Dow Jones and Nasdaq indices.
- If the Russian broker has a subsidiary company operating on the American stock exchange , then you can get access to American trading through it.
- You can trade through a foreign broker who has access to the desired exchange.
However, it is necessary to take into account the difficulties that may arise with such a trade. When buying shares of certain companies, a minimum volume can be set, which can be significant. This requirement reduces the availability of foreign assets. When looking to work with companies included in the index, it should be remembered that building such a portfolio may require significant investments, which may exceed the ability of some investors. What are blue chips, the best blue chips of the US and Russian markets: https://youtu.be/G_WLzGbxfN4 The entire list of current blue chips of the American stock market can be found here: https://fin-plan.org/lk/actions_usa/all / blu /
American blue chips: current list [/ caption] The way out of this situation may be to work with ETF funds. These companies use their money to create complete portfolios of the most important indices and offer clients to buy certain shares of them. In most cases, you will have to work with such funds through a foreign broker.