Blue Chips

economic-dictionary

The expression blue chips is used in the stock market to refer to the most stable and secure securities. These are very solid stocks, linked to strong, consolidated companies that do not undergo large fluctuations in the market and generate recurring profits over time.

The term comes from the blue chips used in casinos (the highest value) and is that, as a general rule, titles blue chips They are the best option to increase our capital in the long term without taking risks.

In Spain, some of the companies that fall under this classification are part of the energy and banking sector.

Blue chips

As we have said, they tend to correspond to well-established firms that rarely require capital increases, whose offer of products and / or services is widely accepted (because they are considered of good quality) and, therefore, are not subject to fluctuations. and they produce more or less homogeneous profits (hence the most aggressive investors reject them, as they are not the best way to obtain short-term profits).

These are, at the same time, stocks with a high volume of liquidity. That is, investors can buy and sell them quite easily as there are always new buyers interested in the company.

Finally, it should be noted that these companies tend to pay dividends on a regular basis, even though they are going through a difficult situation, and they usually experience a smaller drop in the event of a financial crisis, since they behave like defensive securities. In any case, like any stock, its value can go down (and sometimes precipitously).

The opposite side corresponds to the titles known as chicharros, volatile and unsound companies.

Blue chip risk

That said, we must be clear that any company can go bankrupt or disappear. Blue chips tend to be companies with more reputation, stability, and market capitalization. However, we must not fall into the "safe value" dogma, as there is nothing safe in the stock market.

Tags:  banking comparisons markets 

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