Blue Chip

Blue chip originally referred to the color of the chips that had the highest value in some casinos. It later evolved to mean a large, established and financially solid firm. Blue chips usually have a long record of stable solid growth and have weathered multiple economic downturns. Their stock prices are usually less volatile and major benchmark indices usually consist of blue chips.

However, blue chip status is not guaranteed for a firm. A firm may lose its competitiveness, like General Motors(GM) and become much less desirable for investors. In fact, there used to be a saying “As goes General Motors, goes America.” It is only one of the numerous examples how the mighty have fallen. Another example is Bear Stearns(the fifth largest investment bank in the US before implosion) which prided itself on weathering many recessions but imploded rapidly in 2008.

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