The American Stock Market embodies three stock exchanges. The NYSE (New York Stock Exchange), the AMEX (American Stock Exchange now owned by the NYSE), and the NASDAQ (National Association of Securities Dealers) maintain stocks of all American companies.
All three stock exchanges suffice to the same purpose and operate alike, but there are diminutive differences between them. The NYSE is the largest American stock exchange in terms of volume and lists firms from all over the globe.
The AMEX, a smaller stock exchange, was acquired by NYSE in 2008, which licensed the traders to acquire AMEX stocks at the same time. The AMEX was desirable for small companies as the NYSE has very stringent listing policies.
The NASDAQ, on the other hand, does all of its tradings online. It provides equal access to everyone around the world. NASDAQ’s valuations are on a high-rise, thanks to big tech companies like Microsoft and Apple joining it.
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Blue-chip stocks are basically stocks of well-established and economically advanced companies that offer stable and rising dividends. The terminology Blue-chip came from Poker, where blue chips are the most expensive ones.
Most investors believe that investing in a Blue-chip stock guarantees immunity even during challenging times. There is no strait-laced rule as to what shapes up a blue-chip stock.
Generally, blue-chip stocks have a history of unremitting dividend payments to its shareholders, probably over a couple of decades. They almost constantly have a market capitalization of more than $5 billion.
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Blue-chip stocks are very famous among the wealthy in America because of something known as ‘the stepped-up cost basis loophole.’
Under the present tax law in America, if you die and write off your stocks to your descendants, they can value those assets at its fair-market value on the exact date they inherited it.
This means that the assets that you leave for your heir get their initial cost-basis washed out completely. This stepped-up basis loophole gives your heir two options.
The heir can either sell the stock at the present market value or hold on to it, thereby earning higher returns on the same. This is why people prefer blue-chip stocks over others.
For most people, companies that are a component of the Dow Jones Industrial Average Index are typically blue-chips. It ranks stock performances of the biggest 30 companies in the USA.
5 Blue-Chip Companies You Should Definitely Know About
Facebook (NASDAQ: FB)
As an American social media and technology company, Facebook is one of the blue-chip companies. As of today (05 May 2020), Facebook has shown a positive change of +2.37%.
Its stocks are currently valued at USD 210.04. Facebook recently announced a deal with an Indian company Jio, owned by Reliance Industries.
After this deal was announced, Facebook gained 3% in the aftermarket hours trade the same day. With subsidiaries like Whatsapp and Instagram, it is no shocker to see Facebook at this position.
AbbVie Inc. (NYSE: ABBV)
AbbVie is an America based biopharmaceutical company. It was founded in 2013 and is a publicly-traded firm. Given the circumstances of COVID-19, AbbVie has earned the place of a blue-chip and that too rightfully.
The stocks of AbbVie are currently valued at USD 84.69 and are offering a positive gain of +3.25% (as of 05 May 2020). However, the destiny of AbbVie is now attached to its takeover of Allergan. As the merger close-date is approaching, there might be huge changes in the stock prices.
Alibaba Group Holding Ltd. (NYSE: BABA)
Specializing in e-commerce, retail, internet, and technology, Jack Ma’s Alibaba Group has come a long way. Alibaba does not pay dividends, and it is not advisable to invest in such companies.
But, this has not stopped Alibaba from being a profitable investment. Alibaba generates positive free cash flow and has earned its place among the blue-chips.
Alibaba stocks are currently valued at USD 195.13 and have shown a positive growth of +2.07% (as of 5 May 2020). However, its share prices are likely to take a dip.
Berkshire Hathaway Inc. Class B (NYSE: BRK.B)
Owned by Warren Buffett, the financial genius built himself an insurance empire, and a famous American conglomerate holding company was born.
Berkshire offers instant liquidity and market confidence to firms by signing sweet deals with them. The company’s stock investments have not produced satisfying returns, yet it possesses a stock portfolio of USD 180 billion.
Berkshire Hathaway’s current stock prices stand at USD 177.67 at a negative gain of -0.21% (as of 5 May 2020).
Microsoft Corporation (NASDAQ: MSFT)
Microsoft, the American tech-giant founded by Bill Gates, became a household name in the early ’90s because of its famous Windows OS. This company helped evolve a technologically advanced society.
Its subsidiaries like GitHub and Skype are high-valued too. This company stirred a personal computer revolution in the whole world. There was a time when a PC meant it had Windows OS on it.
Bill Gates is also on the Berkshire Hathaway board of directors. His company Microsoft is currently valued at USD 1.38 trillion. No wonder why this company has made it to this list.
Microsoft’s current stock prices are at USD 182.30 and have shown a positive gain of +1.93% (as of 5 May 2020).
The early part of 2020 has tested the sustainability of not only these companies, but the world economy altogether. Most of the economies are crumbling due to the onset of COVID-19.
Still, these companies are acting like anchors, holding the economy on their shoulders and giving it much-required liquidity and cash flow. Major companies like these are also helping out various governments with the help of their donations.
Most of the investors choose to go with blue-chips as they are reliable and can return steady profits over a longer period of time. All of this is not guaranteed, but it is always a good bet.