What are blue chip shares?

You may have heard the term ‘blue chip’ in reports about how companies are faring on the share market.

‘Blue chip’ is a term that’s used to describe the shares of a leading company that is considered to be a strong name in their industry and whose products or services usually dominate their respective markets.

Blue chips are typically large international corporations that have been operating for many years, are considered to be quite stable and are known for their excellent management and strong financial structure.

The term has really become synonymous with being ‘quality’ shares to buy, which is why it is quite popular.

Currently the top 10 shares by value on the ASX are:

ASX Code

Company

Sector

CSL

CSL Ltd

Healthcare

CBA

Commonwealth Bank of Australia

Financials

BHP

BHP Billiton Limited

Materials

WBC

Westpac Banking Corporation

Financials

NAB

National Australia Bank Ltd.

Financials

ANZ

Australia and New Zealand Banking Group Ltd.

Financials

WOW

Woolworths Limited

Consumer Staples

WES

Wesfarmers

Consumer Staples

TLS

Telstra Corporation Ltd

Telecommunication Services

RIO

Rio Tinto Limited

Materials

Source: ASX as at 7 April 2020

The Standard and Poors (S&P) ASX 20 is also known as the blue chip index. This index tracks the performance of the 20 largest companies by market capitalisation listed on the Australian Stock Exchange (ASX).

This is checked by S&P Dow Jones on behalf of the ASX every three months to ensure that the top 20 companies listed on the S&P ASX 20 index are in fact the 20 largest by market capitalisation. If not the companies are switched around to reflect this.

All 20 companies also make up the S&P/ASX 200 which measures the performance of the largest 200 companies listed on the ASX by market value.

Investors can purchase blue chip shares directly using a broker or through exchange traded funds (ETFs) or unlisted managed funds.

Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. This information is not advice and has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives, financial or taxation situation and needs, and, if necessary, seek appropriate professional advice. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.

 

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