Feeling blue is good for stocks, considering Blue Chip Companies in India are measured as the most stable stocks for investing. The Indian stock market has thousands of listed companies. But majority of them are below average performers. Blue chip companies are best stocks available in market for people looking for long-term holding. And as it is most stable, it accounts for one of the best long-term saving instruments because the foundations of Blue Chip Companies are very solid. Blue chip company’s stocks can make profits even in bad times and hence, smart investors pay special attention to these stocks. This option is especially viable for expert investors because of steady returns and low price volatility in stocks. So, if you’re looking for long-term value investment, capitalize on blue chip company’s stocks.
Blue chip company’s stocks also display excellent dividend payment history. Considering that the times are bad, but the dividends are still being distributed shows that the company is very confident about their cash inflows. And this assurance comes from the fact that these blue chip companies have established a strong competitive advantage over others. This competitive superiority makes the blue chip investment a highly preferred option for the investors. While dividend payments are not absolutely necessary for a stock to be considered a blue chip company stock, most blue chip companies have a record of paying stable or rising dividends for years, if not decades.
As we’re aware, stock market investment is always risky but a successful investor manages risk aptly such that his investments bear handsome returns in long run while preserving the investment capital. Investing is blue chip stocks helps to reduce this risk.
Value investors do not buy blue chip stocks always. This is why value investors track the blue chip company stock price movements closely. They wait for prices to fall below its intrinsic value. Buying stocks of blue chip companies at undervalued price levels ensure very good returns.
What are blue chip companies?
Blue-Chip companies are by definition the companies that have "Made it Big". Blue Chip company stocks are the stocks of a large, well-established and financially sound company that has operated for many years. A blue chip company stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector and is more often than not a household name. The term is believed to have been derived from poker, where blue chips are the most expensive chips.
Building blocks of a blue chip company
You can use the company’s sales turnover & EBITDA as your yardstick to screen companies. Companies that have high sales turnover & high EBITDA must be preferred over others.
An established company is defined by the point that it is able to maintain or grow its EBITDA over a long period of time. This is when they enjoy a competitive advantage, a characteristic very important for it to be classified as a blue chip company.
A strong management’s report card reads a profitable balance sheet. Profitability of a company can be established by looking at its Margins.
Even shares of huge multi-nationals won’t attract investors if the pricing is not correct. Take a look at a company’s PEG ratio before buying its stocks. Low PEG (<1) is what the investors prefer.
Best Blue Chip Stocks
Looking at a list of blue chip companies is a great starting point for any investor. The Dow Jones India Index includes largest and most liquid stocks traded in India. The selection to the index is based on rankings by float-adjusted market capitalization and 12 month average daily trading volume.
The index has been created by financial information company Dow Jones Indexes, a business unit of Dow Jones & Company, a News Corporation company.
Top 10 blue chip Companies listed in the index
CompanyWeightInfosys Technologies Ltd.11,88%Reliance Industries Ltd.9,09%Bharti Airtel Ltd.8,28%Housing Development Finance Corp. Ltd.7,60%ITC Ltd.6,80%Larsen & Toubro Ltd.5,68%ICICI Bank Ltd.5,62%State Bank of India5,21%Oil & Natural Gas Corp. Ltd.4,68%Bharat Heavy Electricals Ltd.3,48%