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Microsoft was formed by college computer wizards Bill Gates and Paul Allen back in 1972 and together they grew the company into one of the largest corporations in the history of business. Today, Microsoft’s market cap sits at a stunning $1.5 trillion, making it one of the 3 largest companies in the world. Microsoft produces many of the software staples we find on our computers like Windows, Office and Excel. Microsoft also produces hardware like the Xbox video game consoles and Surface tablets.
Last year, Microsoft made over $143 billion in revenue and the company stock is up more than 49% in the last 12 months. Recently, Microsoft made headlines by announcing the next generation of the Xbox gaming console. The company will be releasing 2 different gaming systems for the 2020 holiday season: the $499 Xbox Series X and the cheaper $299 Xbox Series S. Both systems will be available for purchase in November.
The online commerce giant has soared since the 2020 March lows as more and more people began doing their shopping exclusively on the internet. Like Microsoft, Amazon now boasts a market cap of more than $1.5 trillion and has become among the most successful companies in American history. Together with Facebook, Apple, Netflix and Google, these 5 companies make up the FAANG stocks that have provided massive gains to investors for the better part of the last decade.
The company has recently expanded its reach into the transit sector by adding several new planes in its air fleet. Amazon prides itself on its next-day shipping guarantees and adding new aircraft not only strengthens that guarantee but also allows the company to phase out 3rd-party deliverers like UPS and FedEx. Additionally, Amazon announced plans for 1,000 new warehouses in suburban areas and hiring 100,00 more workers.
Coca-Cola is the largest nonalcoholic beverage entity in the world, owning and marketing some of the leading carbonated beverage brands, such as Coke, Fanta, and Sprite, as well as nonsparkling brands, such as Minute Maid, Georgia Coffee, Costa, and Glaceau. Operationally, the firm focuses its manufacturing efforts early in the supply chain, making the concentrate (or beverage bases) for its drinks that are then processed and distributed by its network of more than 100 bottlers. Concentrate operations represent roughly 85% of the company’s unit case volume. The firm generates most of its revenue internationally, with countries like Mexico, Brazil, and Japan being key markets outside of the U.S.
Adobe Inc. is among the largest and most diversified software companies in the world. Its suite of creative products has enabled students, artists, businesses, government agencies and global brands to deliver exceptional experiences. These products include Adobe Creative Cloud, Adobe Document Cloud and Adobe Experience Cloud.
The creative solutions stock has a market cap of $228 billion and has an EPS of $7.94. It has a 52-week low of $255.13 and a 52-week high of $536.88. Adobe has high liquidity and trades more than 1.4 million shares per day and generated revenue of $11 billion in 2019.
Berkshire Hathaway Inc. New Common Stock (XNYS:BRK/B)
Berkshire Hathaway is a holding company with a wide array of subsidiaries engaged in diverse activities. The firm’s core business segment is insurance, run primarily through Geico, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway Primary Group. Berkshire has used the excess cash thrown off from these and its other operations over the years to acquire Burlington Northern Santa Fe (railroad), Berkshire Hathaway Energy (utilities and energy distributors), and the firms that make up its manufacturing, service, and retailing operations (which include five of Berkshire’s largest noninsurance pretax earnings generators: Precision Castparts, Lubrizol, Clayton Homes, Marmon, and IMC/ISCAR). The conglomerate is unique in that it is run on a completely decentralized basis.
American Express (XNYS:AXP)
American Express Company is a globally integrated payments company. It provides customers with access to financial products that enrich lives and build business success. These financial products include credit cards, corporate cards, travel cards, premium cards, travel insurance and health insurance.
The financial services stock has a market cap of $94 billion and an EPS of $4.06. It has a 52-week low of $67 and a 52-week high of $138.13. American Express has an annual dividend yield of $1.72 per share. It has high liquidity and trades more than 1.1 million shares per day and generated revenue of $30 billion in 2019.
Along with Mastercard, Visa is 1 of 2 primary credit card companies functioning in the United States, with American Express and Discover following behind. Visa has a $450 billion market cap, which surpasses Mastercard by more than $100 billion. Visa has become more than the credit card provider though — it’s a multifaceted payments processing company with a wide range of products and an international footprint.
Visa has met or beaten earnings expectations for 4 straight quarters and has seen both profit and revenue growth in each of the last 5 years. With a firm foothold in the payments processing industry, Visa will likely be a blue chip stock for many years to come.
Johnson & Johnson (XNYS:JNJ)
Johnson & Johnson is among the largest pharmaceutical firms in the U.S. with a $387 billion market cap and over 132,000 employees. Johnson & Johnson manufactures many of the popular medicine brands we use for common aches and pains, like Tylenol, Benadryl, Sudafed and Neosporin. The company also has branched into immunology, neuroscience and infectious disease. They are one of many pharmaceutical firms currently working on a coronavirus vaccine.
Johnson & Johnson’s stock has been one of the stock market’s longest-term winners since going public in the 1960s. However, the headlines haven’t always been positive. The Tylenol murders of the 1980s gained national headlines and the perpetrators were never caught. The State of New York also recently filed a $2 billion lawsuit against the drug manufacturer on the grounds that they downplayed the risks of opioids and spent millions marketing them as safe.
Walt Disney (XNYS:DIS)
Walt Disney owns the rights to some of the most globally recognized characters, from Mickey Mouse to Luke Skywalker. These characters and others are featured in several Disney theme parks around the world. Disney makes live-action and animated films under studios such as Pixar, Marvel, and Lucasfilm and also operates media networks including ESPN and several TV production studios. Disney recently reorganized into four segments with one new segment: direct-to-consumer and international. The new segment includes the two announced OTT offerings, ESPN+ and the Disney SVOD service. The plan also combines two segments, parks and resorts and consumer products, into one. The media networks group contains the U.S. cable channels and ABC. The studio segment holds the movie production assets.
Lockheed Martin (XNYS:LMT)
Lockheed Martin is the largest defense contractor globally and has dominated the Western market for high-end fighter aircraft since the F-35 program was awarded in 2001. Lockheed’s largest segment is Aeronautics, which is dominated by the massive F-35 program. Lockheed’s remaining segments are rotary & mission systems, which is mainly the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture.
In sports, a blue-chip prospect is thought to be a can’t-miss talent — someone who will excel at the game no matter what obstacles are thrown. Blue chips are safe bets with high floors and potentially limitless ceilings. Blue chip stocks are the same way. When investors buy blue chip stocks, they want proven track records and promises of future success. And while investing in stocks is never a completely safe bet, blue chips are often stocks with the best risk/reward trade-off. If you want to add blue chip stocks to your portfolio, here are 10 very successful stocks with staying power.
Blue chip is a nickname given to stocks of a well-established and trusted company. These are companies that investors rely on due to their credibility and reliability. Think industry leaders and household names. These large-cap stocks often have a market valuation of $10 billion or more.
While blue chip companies are reliable, that also comes with slower growth. This makes them a conservative option for investors looking for a safe bet for their already established portfolio.
Blue chip stocks can be identified by the following shared traits:
- Growth history: Blue chips always have a solid history of sustained growth. This also means good future prospects. They’re already established.
- Component of a market index: You’ll find these stocks in major market indexes, like the S&P 500 or the Nasdaq 100.
- Higher dividend payouts: Dividends are regular payments made to investors from a company’s revenue. While there’s no requirement that a blue chip stock pays a dividend, it’s a common trait. Think Verizon’s 5% dividend. Small-cap stocks focus on expansion rather than dividends.
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Should You Invest in Blue Chip Stocks?
Nike. Coca-Cola. Starbucks. Walmart. These are names you know quite well. But should you invest in them? One thing these big names have in common is cost efficiency, which leads to a strong earnings growth and distribution.
Stable and reliable, having a blue chip stock in your portfolio is never a bad thing. This stability points to strong financial footing, meaning no debt and a lot of efficiency. Blue chip stocks are often protected from severe volatility, making the risks quite limited. Although investing in a blue chip stock brings steady, long-term returns — they are well regulated and have potential for regular dividends — there are some cautions to keep in mind.
Lag: Blue chip stocks can lag the market index, meaning they suffer from poor management practices and even scandals. They can also lose market share to smaller companies.
Won’t beat the market: Because blue chip stocks are stable, they are not going to have skyrocketing prices or super-quick growth like smaller companies and start-ups. They aren’t likely to stray from the averages when it comes to returns.
Tricky for young investors: A lot of blue chip stocks pay dividends, rather than investing in their own growth and increased stock value. For investors just starting out, you may want to find a stock that helps you build wealth, rather than a steady stock that won’t see much action.
The (Steady) Rise of Blue Chip Stocks
Blue chip stocks are the companies you trust. The ones in your home. The drinks and food on your shelf, the hair products in your bathroom, the credit card in your wallet, the shows you watch. Blue chip stocks are reliable, which is why they’re so appealing to investors.
While blue chip stocks are slow to grow, they’re still a trusted addition to any portfolio. That’s because these companies are predicted to have a bright future, whether through new products or inventions. Think Apple’s VR headset and Watch or Nike’s collaborations and new shoe technology. If you’re looking for dividend payouts and steady growth, blue chip stocks are perfect for your portfolio.
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