Blue chip (stock market)
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A blue chip is
stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
in a '' stock corporation'' (contrasted with non-stock one) with a national reputation for quality, reliability, and the ability to operate profitably in good and bad times.


Origin

As befits the sometimes high-risk nature of stock picking, the term "blue chip" derives from the
card game A card game is any game using playing cards as the primary device with which the game is played, be they traditional or game-specific. Countless card games exist, including families of related games (such as poker). A small number of card ...
poker Poker is a family of comparing card games in which players wager over which hand is best according to that specific game's rules. It is played worldwide, however in some places the rules may vary. While the earliest known form of the game w ...
. The simplest sets of
poker chips Casino tokens (also known as casino or gaming chips, checks, cheques or poker chips) are small discs used in terms of currency in casinos. Colored metal, injection-molded plastic or compression molded clay tokens of various denominations are us ...
include white, red, and blue chips, with American tradition dictating that the blues are highest in value. In the United States, blue chips were traditionally used for higher values such that "blue chip" used in noun and adjectival
senses A sense is a biological system used by an organism for sensation, the process of gathering information about the world through the detection of stimuli. (For example, in the human body, the brain which is part of the central nervous system rec ...
are attested since 1873 and 1894, respectively. This established
connotation A connotation is a commonly understood cultural or emotional association that any given word or phrase carries, in addition to its explicit or literal meaning, which is its denotation. A connotation is frequently described as either positive o ...
was first extended to the sense of a blue-chip stock in the 1920s. According to
Dow Jones Dow Jones is a combination of the names of business partners Charles Dow and Edward Jones. Dow Jones & Company Dow, Jones and Charles Bergstresser founded Dow Jones & Company in 1882. That company eventually became a subsidiary of News Corp, and ...
company
folklore Folklore is shared by a particular group of people; it encompasses the traditions common to that culture, subculture or group. This includes oral traditions such as tales, legends, proverbs and jokes. They include material culture, ranging ...
, this sense extension was coined by Oliver Gingold (an early employee of the company that would become Dow Jones) sometime in the 1920s, when Gingold was standing by the stock ticker at the
brokerage firm A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confu ...
that later became
Merrill Lynch Merrill (officially Merrill Lynch, Pierce, Fenner & Smith Incorporated), previously branded Merrill Lynch, is an American investment management and wealth management division of Bank of America. Along with BofA Securities, the investment bank ...
. Noticing several trades at $200 or $250 a share or more, he said to Lucien Hooper of stock brokerage 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 high-quality stocks.


United States

The most popular index that follows
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
blue chips is the
Dow Jones Industrial Average The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity inde ...
, 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 A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...
since October 1, 1928.


See also

*
Chip (stock market) A chip is a terminology to describe a stock of a particular quality. Chip Share {, class="wikitable" , +Share !Name !Description , - , , A share , Company listed in Shanghai or Shenzhen and traded in renminbi , - , , B share , C ...
*
DAX Dax or DAX may refer to: Business and organizations * DAX, stock market index of the top 40 German companies ** DAX 100, an expanded index of 100 stocks, superseded by the HDAX ** TecDAX, stock index of the top 30 German technology firms * Dax ...
*
FTSE 100 Index The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100, FTSE, or, informally, the "Footsie" , is a share index of the 100 companies listed on the London Stock Exchange with (in principle) the highest market ...


References

{{DEFAULTSORT:Blue Chip (Stock Market) Stock market