Blue chip stocks are well-established, financially sound companies. Think household names like Johnson & Johnson and Walmart. These are companies that have been in business for many years. They have dependable earnings and seem to still be on an upward trajectory.
These stocks are thought of as reliable, safe investments. I’ll tell you why I don’t care about that and what I prefer to trade instead.
First, let’s take a closer look…
Table of Contents
- 1 What are Blue Chip Stocks?
- 2 Advantages of Trading Blue-Chips
- 3 Risks of Trading Blue Chip Stocks
- 4 Top 15 Blue-Chip Stocks (2023)
- 4.1 Walmart Inc. (NYSE: WMT) — The Retail Blue-Chip Stock
- 4.2 Chevron Corp. (NYSE: CVX) — The Oil & Gas Blue-Chip Stock
- 4.3 Home Depot Inc. (NYSE: HD) — The Hardware Chain Blue-Chip Stock
- 4.4 Procter & Gamble Co. (NYSE: PG) — The Consumer Staple Blue-Chip Stock
- 4.5 Johnson & Johnson (NYSE: JNJ) — The Dividend-Producing Blue-Chip Stock
- 4.6 Coca-Cola Co. (NYSE: KO) — The Soft Drink Blue-Chip Stock
- 4.7 Berkshire Hathaway (NYSE: BRK.B) — The Warren Buffett Blue-Chip Stock
- 4.8 McDonald’s Corp. (NYSE: MCD) — The Fast Food Blue-Chip Stock
- 4.9 Goldman Sachs Group Inc. (NYSE: GS) — The Investment Bank Blue-Chip Stock
- 4.10 American Express (NYSE: AXP) — The Financial Services Blue-Chip Stock
- 4.11 Microsoft Corp. (NASDAQ: MSFT) — The AI Exposure Blue-Chip Stock
- 4.12 Travelers Companies Inc. (NYSE: TRV) — The Insurance Blue-Chip Stock
- 4.13 Visa Inc. (NYSE: V) — The Crypto Exposure Blue-Chip Stock
- 4.14 Apple Inc. (NASDAQ: AAPL) — The Sector Leader Blue-Chip Stock
- 4.15 Nike Inc. (NYSE: NKE) — The NFT Exposure Blue-Chip Stock
- 5 Blue Chip Stock Trading Strategies
- 6 Final Takeaways
What are Blue Chip Stocks?
The term ‘blue chip’ comes from the game of poker. At a standard poker table, the most valuable chips are blue. Somehow people started applying the term to the most valuable companies on Wall Street.
These are market leaders, and their stocks are thought of as good stores of value. Unlike the sketchy penny stocks I trade, these stocks are household names. They’re large companies that often help shape the economy.
While there are no clear guidelines for making the blue-chip cut, a company generally needs a market cap of at least $5 billion and years of stable earnings.
These stocks make up the most significant components of the three large U.S. indexes: the Dow Jones Industrial Average, the Standard & Poor’s 500, and the NASDAQ-100.
While blue-chip stocks are a favorite of many traders, it pays to diversify your strategy. One way to do this is by exploring the world of penny stocks. Although they carry more risk, they also offer the potential for significant returns. If you’re interested in learning more about this exciting area of the market, check out our guide on penny stocks.
Advantages of Trading Blue-Chips
The safety-minded school of thought likes the advantages of trading blue-chip stocks. Here’s a list of the most attractive ones:
- Revenue Growth: Blue-chip stocks usually have page after page of revenue growth in their past. This makes them a safer bet to continue growing.
- Market Recognition: There’s more out there about blue-chip stocks. That means it’s easier to research them.
- Services and Products: Blue-chip stocks run the gamut from banks and insurance to real estate and consumer goods — and everything else! That means they have a constant stream of new catalysts, and exposure to a range of sectors.
- Dividend Yield: Blue-chip stocks often offer generous dividends to their investors and shareholders.
- Lower Risk: Due to their history and stable operations, these companies aren’t likely to go bankrupt too soon.
- Retirement Portfolios: Blue-chip stocks provide a good split of capital appreciation and dividend income.
Investing in blue-chip stocks is a smart move for those seeking stability and consistent returns. However, it’s also worth considering value stocks, which are shares of companies that are considered undervalued compared to their intrinsic value. Value investing can be a great strategy for those looking for potential growth at a discounted price. To learn more about this investment strategy, read our article on investing in value stocks.
Risks of Trading Blue Chip Stocks
Part of all trading is paying attention to risk — especially in supposedly “safe” investments like blue chips. Here are some of the downsides:
- Less Growth Potential: Blue-chip stocks often gain less percentage-wise than smaller companies — especially in the short term! If you’re a small-account trader, you probably won’t be content with your investing earning less than the APR on your credit cards.
- Fees and Commissions: If you’re looking to get blue-chip exposure through mutual funds or ETFs look out for exchange fees and commissions. They can eat into your returns.
- They Rarely Outperform the Market: These stocks make up the leading indexes — they are the markets.
- Limited Exposure to Hot Sectors: Blue-chip stocks are usually a bit more traditional minded, limiting exposure to emerging sectors and the supernovas that come with them.
Growth investing, which involves investing in companies that are expected to grow at an above-average rate compared to other companies in the market, is another approach to consider. This strategy can lead to significant returns, although it also comes with its own set of risks. If you’re interested in exploring this further, we recommend reading our guide on investing in growth stocks.
Top 15 Blue-Chip Stocks (2023)
My top blue-chip stock picks are:
- (NYSE: WMT) — Walmart Inc. — The Retail Blue-Chip Stock
- (NYSE: CVX) — Chevron Corp. — The Oil & Gas Blue-Chip Stock
- (NYSE: HD) — Home Depot Inc. — The Hardware Chain Blue-Chip Stock
- (NYSE: PG) — Procter & Gamble Co. — The Consumer Staple Blue-Chip Stock
- (NYSE: JNJ) — Johnson & Johnson — The Dividend-Producing Blue-Chip Stock
- (NYSE: KO) — Coca-Cola Co. — The Soft Drink Blue-Chip Stock
- (NYSE: BRK.B) — Berkshire Hathaway — The Warren Buffett Blue-Chip Stock
- (NYSE: MCD) — McDonald’s Corp. — The Fast Food Blue-Chip Stock
- (NYSE: GS) — Goldman Sachs Group Inc. — The Investment Bank Blue-Chip Stock
- (NYSE: AXP) — American Express — The Financial Services Blue-Chip Stock
- (NASDAQ: MSFT) — Microsoft Corp. — The AI Exposure Blue-Chip Stock
- (NYSE: TRV) — Travelers Companies Inc. — The Insurance Blue-Chip Stock
- (NYSE: V) — Visa Inc. — The Crypto Exposure Blue-Chip Stock
- (NASDAQ: AAPL) — Apple Inc. — The Sector Leader Blue-Chip Stock
- (NYSE: NKE) — Nike Inc. — The NFT Exposure Blue-Chip Stock
This is just a watchlist — I won’t trade any of these picks unless they fit my preferred setups. In fact, I probably won’t trade any of these stocks even if they do show an opportunity…
I like trading penny stocks, not heavyweight stocks like these. Penny stocks tend to follow patterns like these…
Remember this chart well, its the basis for my 7-step framework, @30DayBoot & @completepenny & you must study not to fall prey to greed/ignorance or you'll get wrecked like 90% of traders. It's VITAL to sell into excessive strength/hype, do not just hold & hope like most newbies pic.twitter.com/QsAGHsI6lp
I watch stocks like these so I can track general market sentiment. These stocks are sector leaders, which means they influence other stocks with their moves.
Let’s get into it!
Walmart Inc. (NYSE: WMT) — The Retail Blue-Chip Stock
My first blue-chip stock pick is Walmart Inc. (NYSE: WMT).
WMT is the only retailer that can compete with Amazon.com Inc. (NASDAQ: AMZN). The company’s boosting its online presence and maintaining the low prices that keep customers happy.
Like Amazon, it’s got its corporate fingers in a lot of different pies. In 2021 it acquired a telehealth provider to boost its own offerings. In 2023 it acquired a Mexican digital payment company to complement the two domestic fintech businesses it bought in 2022.
It’s a threat in several sectors. That combined with steady year-over-year growth make it a perfect blue-chip stock.
Chevron Corp. (NYSE: CVX) — The Oil & Gas Blue-Chip Stock
My second blue-chip stock pick is Chevron Corp. (NYSE: CVX).
Oil and gas stocks had a tremendous 2022. Much of that was hype, but that isn’t all that drove Chevron’s 60% gains.
In 2023, the stock sagged a bit. Gas prices are falling. Investors like Warren Buffett (we’ll get to him later) are selling their shares and taking profits.
Long-term prospects for oil and gas heavyweights like Chevron are still good. The stock is still close to all-time highs, and profits have stayed high despite the fall in gas prices.
Home Depot Inc. (NYSE: HD) — The Hardware Chain Blue-Chip Stock
My third blue-chip stock pick is Home Depot Inc. (NYSE: HD).
The largest home improvement retailer in the U.S. has sagged off its 2021 highs. Driven by the home improvement hot sector, HD spiked 173% in 2020 and 2021… now it’s down 30%.
Still, the chart looks decent. I like to see spikes followed by consolidation in a growth stock.
That’s usually a sign that the speculation has cooled off, but the price is backed by real strength. That’s how you get to the next spike.
Procter & Gamble Co. (NYSE: PG) — The Consumer Staple Blue-Chip Stock
My fourth blue-chip stock pick is Procter & Gamble Co. (NYSE: PG).
PG is a consumer goods corporation, selling recession-resistant brands including Tide, Bounty, Gillette, and Tampax. Stocks in the consumer staples sector are usually referred to as defensive stocks — producing goods that people buy in the same quantity whether they’re flush with cash or not.
That’s good news for the uncertain economy of 2023, but the inflation we’ve had is even better news for PG. The company raised prices 10% for two consecutive quarters in 2023, boosting profits.
It isn’t good news all around. Even as revenue rose 4% in Q1 2023 year-over-year, sales volume fell by 3%.
Johnson & Johnson (NYSE: JNJ) — The Dividend-Producing Blue-Chip Stock
My fifth blue-chip stock pick is Johnson & Johnson (NYSE: JNJ).
JNJ is another consumer goods business. Its brands include Band-Aid and Tylenol — names that have become catch-all terms.
It’s a tiny bit more volatile than PG, with better dividends as well.
Now that JNJ has spun off its consumer health business Kenvue Inc. (NYSE: KVUE), it’s opened itself to even more volatility from the high-growth pharmaceutical and medical device lines it’s kept in-house.
Your job as a trader is to profit from volatility, do NOT fall in love with any trade or asset as a trade is not profitable until you lock in your profits & getting emotional can muddy the waters. Similarly, it's difficult to cut losses fast if you become too emotionally involved
Coca-Cola Co. (NYSE: KO) — The Soft Drink Blue-Chip Stock
My sixth blue-chip stock pick is Coca-Cola Co. (NYSE: KO).
Over the past two decades, soft drink consumption has dipped by 25%. Yet KO stock is up almost 200% over that time.
How does that happen?
It’s one of the attractions of blue-chip stocks — they’re diversified. The company just announced a new $650 million milk processing plant.
Unlike some of the blue chips on this list, KO is a mega-cap stock. That means its market cap is above $200 billion. At that kind of valuation, it can’t move fast.
For the penny stocks I like to trade, it isn’t unusual to see 200% spikes in a single day.
Berkshire Hathaway (NYSE: BRK.B) — The Warren Buffett Blue-Chip Stock
My seventh blue-chip stock pick is Berkshire Hathaway (NYSE: BRK.B).
This is Warren Buffett’s company. We’re sticking with the Class B shares for this watchlist — Class A shares trade for over $300,000 apiece!
Buying BRK stock is essentially putting your money on Warren Buffett. He’s arguably the greatest investor of all time.
He isn’t just coasting on reputation. Since the March 2020 bear market, BRK.B shares have gained nearly 100%.
McDonald’s Corp. (NYSE: MCD) — The Fast Food Blue-Chip Stock
My eighth blue-chip stock pick is McDonald’s Corp. (NYSE: MCD).
MCD is the largest restaurant chain in the world. There are McDonald’s restaurants in over 100 countries. The company is constantly tinkering with menu options and has arguably the best marketing skills in the industry.
2022’s inflation and uncertain market environment didn’t knock MCD off its all-time-high charting course. Tighter wallets seemed to lead to the outsized earnings that MCD posted in March 2023, which led to a 10% stock bump.
Goldman Sachs Group Inc. (NYSE: GS) — The Investment Bank Blue-Chip Stock
My ninth blue-chip stock pick is Goldman Sachs Group Inc. (NYSE: GS).
Goldman Sachs is usually analyzing other stocks, but the 2020–21 hot market was kind to this bank stock. It soared 165% before pulling back 20% to its current range.
Like I wrote before, this kind of consolidation is often necessary. It seems to have escaped the banking crisis with a warning, and might soon be ready for the next leg up.
American Express (NYSE: AXP) — The Financial Services Blue-Chip Stock
My 10th blue-chip stock pick is American Express (NYSE: AXP).
If banks are too risky for you, the financial sector has some other blue chips to offer. AXP’s last three years mirror GS’s, and interest rates are still a worry here…
But AXP continues to earn its blue-chip status with some interesting attributes:
- Its dividend payouts are the highest they’ve ever been
- It’s making record revenues
- Its price-to-earnings (P/E) ratio is cheaper than its 5-year average, and about 60% of the level of the next credit card stock on this list…
- It’s made some under-the-radar strides in fintech
Like I’ve said, I’m not an investor. But this list is what a lot of them are looking for.
Microsoft Corp. (NASDAQ: MSFT) — The AI Exposure Blue-Chip Stock
My 11th blue-chip stock pick is Microsoft Corp. (NASDAQ: MSFT).
The Microsoft Windows operating system is used all over the world. The company’s Xbox is one of the leading gaming consoles. And those aren’t even the most exciting things about this $2 trillion company — one of the only members of the $2 trillion club in the world.
The big catalyst of MSFT’s 40% climb in 2023 is AI. ChatGPT is the biggest name in AI, and it’s been licensed to Microsoft’s Bing browser.
This AI partnership seems to produce big news every month. Catalysts that can move mega-cap stocks by double-digit percentages are the rarest thing there is in the stock world.
Travelers Companies Inc. (NYSE: TRV) — The Insurance Blue-Chip Stock
My 12th blue-chip stock pick is Travelers Companies Inc. (NYSE: TRV).
TRV isn’t the sexiest stock on this list…
It isn’t bringing AI into the public arena. And it isn’t a brand that you’d find in your medicine cabinet.
It’s still displayed solid growth through its dependable, boring business — insurance.
Visa Inc. (NYSE: V) — The Crypto Exposure Blue-Chip Stock
My 13th blue-chip stock pick is Visa Inc. (NYSE: V).
Take a minute to compare Visa’s 5-year chart with AXP, its credit card rival.
They are different companies, for sure. But the main difference traders see is the 65% rise from 2020–2021 — nearly 100% less than AXP’s move. That’s the difference between a large-cap move and a mega-cap move.
OK, that was my pitch for trading cheaper stocks. Now let me tell you why Visa is worth watching.
Visa’s ambitious crypto roadmap could be a path to explosive growth.
I don’t trade crypto. But when bitcoin is right, it has the potential to be the hottest thing in any market…
That could be good news for a “safer” investment vehicle like V.
Apple Inc. (NASDAQ: AAPL) — The Sector Leader Blue-Chip Stock
My 14th blue-chip stock pick is Apple Inc. (NASDAQ: AAPL).
AAPL changed the game in the tech industry. iPhones, iPads, and Macs are in households, businesses, and schools worldwide. Apple is one of the most valuable companies in the world, with a market cap of nearly $3 trillion. That’s almost 7% of the total market cap of all U.S. stocks!
That heavyweight valuation hasn’t slowed it down too much. AAPL went on the warpath in 2020–21, gaining 165%.
After slumping into 2023, it’s back to all-time highs as I’m writing this. It might have more growth in store as it tries to lure users further into the Apple ecosystem — its new high-yield savings account beats most banks.
Nike Inc. (NYSE: NKE) — The NFT Exposure Blue-Chip Stock
My 15th blue-chip stock pick is Nike Inc. (NYSE: NKE).
Nike is a huge brand. It’s also a fairly innovative one.
Forget about their past accomplishments, recently chronicled in the movie Air. What I’m excited about are the new tech possibilities.
Nike tapped into its huge collectors market by skipping the shoes and launching its own NFT line. As of February 2023, it generated $1.3 billion in sales volume and $185 million in revenue. That’s 8 times what the second-leading brand NFT line has made!
Traders look for hot catalysts like this. Blue-chip stock buyers look for big growth potential. Nike might have found a way to deliver both.
Blue Chip Stock Trading Strategies
To active traders like me, blue-chip stock trading strategies have to be based on the same criteria as any good trading strategy. That means you should look for these basic ingredients:
- A good catalyst
- Unusual volume
The best kind of catalyst is stock-specific news and general stock market trends. These catalysts can come from articles and newsletters, analyst advice, Twitter threads.
Pro traders use a top-shelf news scanner to stay on top of catalysts — like the one in my favorite trading platform, StocksToTrade! It’s designed by traders like me (actually, including me) to deliver everything we need in a trading platform…
Blue-chip stocks are valued for their fundamental strengths — so revenue, earnings, cash reserves, and growth rates all come into play.
A good blue-chip trading strategy should strike the right balance between risk and reward. Look at the potential profits and losses of each trade, and always cut your losses quickly.
Blue chips are the market giants. Pretty much everybody knows these stocks, and it’s easy to find information on them.
The downside? They aren’t as accessible to traders with small accounts.
Are you serious about trading? Want to learn how to manage your own money? Or how you can trade with a small account?
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What do you think about blue-chip stocks? Let me know in the comments!