Recently, on The Money Minute, we’ve talked about growth versus value stocks. There’s another type of investment you should know about, that I’d argue falls under the value stock umbrella. And— surprise, surprise, I have an embarrassing story about this investment.
Once upon a time at CNN, I was eavesdropping on my colleagues talking about “blue chip companies.” I thought to myself: are there really that many companies that sell blue chips? Why are we making such a big deal about it? Are blue chips even really that good? Later, of course, I learned that “blue chip” was a term used to describe a certain group of companies… not, literally companies that made blue tortilla chips. There are three things you can tell about me from this story: I really did learn all this stuff in the School of Hard Knocks, I’m not a big poker player, and I love snacks.
If I was a gambler, this term probably would have made more sense to me at the time. What I’m told is that “blue chips” are the big bosses of the poker table; they’re worth the most moolah. Same in the stock world. Kind of. Not only are blue chip companies considered high-value, they also have to have a good reputation as a solid investment (as solid as any investment can be) with a history of high performance. Most stocks included in the Dow Index would be considered blue chip: like Microsoft, Walmart, Apple. That’s why I argue that blue chip companies fall under that “value stock” umbrella.
Now you’re in the know… and probably a little hungry.
Leave a Reply