Blue chip (stock market)

According to the New York Stock Exchange, a blue chip is stock in a corporation with a national reputation for quality, reliability, and the ability to operate profitably in good times and bad. The most popular index that follows U.S. blue chips is the Dow Jones Industrial Average. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. All companies in the Dow Jones Industrial Average are blue-chips, but the Dow Jones Industrial Average is an index that does not include all companies that are blue chips. Nevertheless, it has been a widely followed indicator of the stock market since October 1, 1928. Often these stocks pay dividends.

Origin

As befits the sometimes high-risk nature of stock picking, "blue chip" derives from poker. The simplest sets of poker betting discs include white, red, and blue chips, with tradition dictating that the blues are highest in value. If a white chip is worth $1, a red is usually worth $5, and a blue $25.

The phrase was coined by Oliver Gingold of Dow Jones sometime in 1923 or 1924. Company folklore recounts that the term apparently got its start when Gingold was standing by the stock ticker at the brokerage firm that later became Merrill Lynch. Noticing several trades at $200 or $250 a share or more, he said to Lucien Hooper of W.E. Hutton & Co. that he intended to return to the office to "write about these blue-chip stocks". It has been in use ever since, originally in reference to high-priced stocks, more commonly used today to refer to quality stocks. In contemporary media, blue chips and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.

See also

• Chip (stock market)