Why high quality stocks are called ‘blue chip’

You hear the term “blue chip stock” used ubiquitously in the media to describe the equity of large companies whose profitability tends to be stable, regardless of swings in the business cycle. The Dow Jones Industrial Average is often described as an index of high quality, blue chip stocks. But do you know the origin of the term?

Oliver Gingold, one of the early employees at Wall Street Journal publisher Dow Jones, is widely credited with coining the term in the early 1920s. According to one account, Gingold was standing by a rolling stock ticker at a brokerage firm and noticed several trades of stocks valued at more than $200. He told those nearby that he planned to head back to the office and “write about these blue chips stocks.”

Gingold probably was a poker player. In poker, bets are made with white, red, and blue chips — and the blues are typically the highest in value.

poker chips

Circa 2013, the term “blue chip” is still in common currency. But given the more rapid rise and fall of companies in this age of disruptive technological change, market participants have come to question whether any stock can today be considered rock solid in the way blue chips once were. Consider the travails that visited the once bluest of the blue corporations like General Motors (GM), Lehman Brothers and Eastman Kodak (EK).

In today’s global economy, there are precious few sure bets.

Photo Credit: daveynin

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Xavier Brenner
Xavier Brenner
Xavier Brenner has covered global market, business and economic trends for Interactive Brokers Asset Management since 2013. An experienced financial journalist, Brenner offers analysis and insights on the stories that matter to the discerning investor.