Blue chip (stock market)
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.
As befits the sometimes high-risk nature of stock picking, the term "blue chip" derives from poker. The simplest sets of poker chips 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.
In 19th-century United States, there was enough of a tradition of using blue chips for higher values that "blue chip" in noun and adjective senses signaling high-value chips and high-value property are attested since 1873 and 1894, respectively. This established connotation was first extended to the sense of a blue-chip stock in the 1920s. According to Dow Jones company folklore, this sense extension was coined by Oliver Gingold sometime in the 1920s 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 high-quality stocks. In contemporary media, blue chip stocks and their daily performances are frequently mentioned alongside other economic averages like the Dow Jones Industrial Average.
- "NYSE Group, Inc". Nyse.com. Retrieved 2011-09-19.
- Blue Chip Definition Investopedia
- "Dow Jones Industrial Average: Stock Index Summary". Bloomberg. 1928-10-01. Retrieved 2011-09-19.
- Merriam-Webster, Merriam-Webster's Unabridged Dictionary, Merriam-Webster.
- Merriam-Webster, Merriam-Webster's Collegiate Dictionary, Merriam-Webster.
- March 12, 2008, Dow Jones internal news item "Ever Wonder How 'Blue-Chip' Stocks Started?"