Blue-chip stock

A blue-chip stock is an informal label for the shares of a large, long-established company. It is a nickname, not a certification: no exchange, regulator or standards body maintains an official list of blue chips, sets criteria for the term, or strikes companies off when they no longer qualify. The label is applied loosely, by common usage, and two people using it may mean rather different things by it.

A worked example

Imagine an observer surveying a hypothetical market of 500 listed companies who decides to call the largest 50 by market capitalisation the blue chips — the top 10 per cent. A second observer might instead pick the largest 30, and a third might also require, say, at least 25 years of trading history. The three lists would overlap but differ, and none would be wrong, because there is no rule to be right about.

The label does not tell you that a company is safe, that its shares are sensibly priced, or that its position is permanent. Large, long-established companies can and do fail; age and size are facts about a company's past, and the nickname says nothing about what comes next.