12 blue chips you wish you'd bought in 1998

Blue-Chip Stocks

"Blue chips are companies that pay a dividend and increase it over time."

Blue Chips

Blue chips are the cream of the common stock crop.

They are stocks issued by companies that have a long track record of earning profits and paying dividends.  

Blue-chip stocks are issued by large, well-established firms that have impeccable financial credentials.

These companies are often the leaders in their industries.




Not all blue chips are alike.

Some provide consistently high dividend yields; others are more growth oriented.

While blue-chip stocks are not immune from bear markets, they are less risky than most stocks.

They tend to appeal to investors who are looking for quality, dividend-paying investments with some growth potential.

Blue chips appeal to investors who want to earn higher returns than bonds typically offer without taking a great deal of risk.



Examples:

Good examples of blue chip growth stocks are:

• Nike,
• Procter & Gamble,
• Home Depot,
• Walgreen's,
• Lowe's Companies, and 
• United Parcel Service.

Examples of high-yielding blue chips include such companies as:

• AT&T,
• Chevron,
• Merck,
• Johnson & Johnson,
• McDonald's, and 
• Pfizer.

The excitement of blue chip value investing

The excitement behind blue-chip value investing doesn't reside in life-changing tales of a stock that moved up 800% in a year or two.

Those stories were common during the late 1990s with Internet stocks, but as we saw in 2001 and 2002, what rises dramatically and rapidly often falls with equal fury.

The excitement of blue-chip value investing comes from looking at long-term charts of what value stocks do as a group over a period of decades - or what they have done for Warren Buffett.

That extra 2 % or 3% a year in returns, multiplied over a lifetime of investing, makes for some heart-pounding piles of cash down the line.  It will give you your million-dollar portfolio - and much more.

Stage Is Set (Again) for a Blue-Chip Revival

Fundamentally

Stage Is Set (Again) for a Blue-Chip Revival

By PAUL J. LIM
Published: October 2, 2010

EVER since big blue-chip domestic stocks fell out of favor in early 2000, many market strategists have regularly been predicting their imminent return to glory.

In 2003, after the tech bubble burst and market valuations started to fall back to earth, large-capitalization stocks were supposed to catch a second wind. They didn’t.

Amid the global financial panic of 2008, investors were supposed to regain their appetite for blue chips because, in uncertain times, these industry-dominating companies could offer steadier growth. Yet, that year, large-cap stocks fell even harder than small-company stocks. And to add insult to injury, small stocks went on to outpace large ones in 2009 and so far this year. 

Today, some market watchers are armed with a kitchen sink full of arguments that the stage is set for a blue-chip revival.

Not only are the large caps cheaper than small caps by historical standards, but some of these big companies, like Hewlett-Packard and Microsoft, are trading at price-to-earnings ratios of nine or less, based on projected earnings. Large stocks also have greater exposure to foreign markets, including emerging markets like China. 

“I actually think large-cap stocks have more growth potential because they can go outside the United States,” said Thomas H. Forester, manager of the Forester Value fund, who has been bullish about this group since 2008.

Large stocks are also sitting on a mountain of cash. “At some point, these companies will start using that money to raise dividends, buy back their stock, or start buying each other,” said Robert E. Turner, chief investment officer at Turner Investment Partners, a money management firm in Berwyn, Pa. He says that cash has been especially important since the disruptions of the financial crisis.

All of these trends could benefit large-cap stocks, which have had a miserable decade. While small caps were up nearly 4 percent, annualized, from 2000 to the end of 2009, and mid-caps rose more than 6 percent, annualized, the large-cap Standard & Poor’s 500 lost about 1 percent. 

But before investors get too worked up about a pending blue-chip boom, it’s important to note that it could take months, if not years, before large stocks stage a real comeback.

FOR starters, the bull market that began in March 2009 is only 18 months old. Historically, shares of small-but-nimble companies have outpaced the blue chips through the first two years of a rally, according to Sam Stovall, chief investment strategist at S.& P. In fact, in the second years of bull markets since 1950, the S.& P. 600 index of small stocks has gained 22 percent, on average, versus 18 percent for the S.& P. 500 index of blue-chip shares.

So “there’s absolutely no reason why small caps can’t keep outperforming large caps,” Mr. Stovall said.
James B. Stack, editor of the InvesTech Market Analyst, a newsletter based in Whitefish, Mont., noted that the so-called Nifty Fifty era — when the market’s biggest growth stocks dominated — came to an end in the 1973-74 bear market. After that, small stocks trounced blue chips until the early 1980s.

That’s not the only example of a slow recovery. After the 1929 crash, it wasn’t until 1945 that large stocks made it back to even. And blue-chip stock prices appreciated at a relatively modest rate in succeeding years: 4.6 percent, annualized, from 1945 to 1953.

Finally, there’s this: Large stocks continue to be the darlings of professional investors. A recent survey of money managers by Russell Investments found that two-thirds described themselves as bullish on large growth stocks, versus only around half who are similarly optimistic about small-cap shares.

That may not be a good sign. “If the consensus says small caps will underperform large caps, you know there’s a good chance they won’t,” Mr. Stovall said.

At the very least, says Robert Sharps, who manages assets for T. Rowe Price institutional clients, even if blue chips don’t return to their late-1990s glory anytime soon, it’s still “highly probable that returns in the next decade will be markedly better than the last one.” 

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

http://www.nytimes.com/2010/10/03/business/economy/03fund.html?_r=1&ref=business

Virtues of Major Stocks (Blue Chips)

- Blue chip companies are not likely to go bankrupt.

- They have their troubles, but they are big enough to hire a CEO who can bring them back to life. Among the 30 companies in the DJIA, for instance, such companies as IBM, Eastman Kodak, AT&T, Sears, United Technologies, and Allied Signal were restructured in recent years by a few dynamic executives.

- Major corporations are also found in most institutional portfolios such as mutual funds, pension plans, bank trust departments, and insurance companies. One reason they like these big-capitalization stocks is liquidity.

• Since institutions have huge amounts of cash to invest, they feel comfortable with these stocks. The reason: The number of shares outstanding is huge, which means they won't disturb the market when they buy or sell.
• By contrast, if a major institution tries to invest a million dollars in a tiny Nasdaq company, the stock will shoot up several points before they complete their investing. It could be just as disruptive when they try to get out.
• As a consequence, major companies are in demand and are not left to drift.
• On the other hand, there are thousands of small companies that no one ever heard of. The only investors who can push them up are individuals - not institutions.

- Big companies can afford to hire top-notch executives and they have the resources to allocate to research and marketing.

- Also, their new products, acquisitions, management changes, and strategies are discussed frequently in such publications as the Wall Street Journal, the New York Times, Barron's, Fortune, Forbes, and Business Week, all of which are easily available.

Under 50? Do This, or You'll Regret It!

Under 50? Do This, or You'll Regret It!
By John Rosevear December 8, 2008 Comments (1)

I know, I know -- the stock market is crazy and unpredictable right now.

I know that sitting in cash or doing nothing until things settle down seems like a sensible course of action.

But I also know this: 10 or 15 years from now, the market will be up. Way up from here, in all likelihood.

If you're under 50, and you're trying to figure out what to do with the wreckage of your retirement portfolio, there's only one good answer: Buy great stocks.

Here's why.

When the game is rigged, bet with the house No, the stock market isn't "rigged" in the sense of being manipulated. It is, however, inherent in the market's nature to go up over the long term, scary bear markets notwithstanding.

Check out these 15-year returns, which assume purchase on Dec. 8, 1993 and include reinvested dividends for those stocks that have them:

Stock-----15-Year Gain

McDonald's (NYSE: MCD)
430%

Apple (Nasdaq: AAPL)
1,110%

Southern Company (NYSE: SO)
804%

Nokia (NYSE: NOK)
541%*

Qualcomm (Nasdaq: QCOM)
1,945%

Johnson & Johnson (NYSE: JNJ)
573%

Target (NYSE: TGT)
612%

Source: Yahoo! Finance.
Figures as of market close on Dec. 5, 2008. *Nokia return since Apr. 25, 1995.

Those returns are despite the dot-com bubble bursting and despite the recent market crisis. As Richard Ferri, an investment manager and author of several books on asset allocation and indexed investing, argues in this month's issue of Rule Your Retirement, there are strong reasons to believe that the market is naturally prone to going up over time -- and that average annual returns near 10% over the next 15 years are extremely likely.

His methodology and reasoning are a little too elaborate to lay out here -- check out the complete article for specifics -- but his recommendations for those under 50 are crystal-clear:

• Your portfolio should be 100% in stocks.
  
• Continue to add to your retirement accounts, and use that money to buy stocks.
  
• Be aggressive -- as aggressive as you can stand.
  
• Ignore performance. Don't look at your statements.
  

That last one might seem weird -- how will you know how you're doing if you don't look at your statements? -- but Ferri has a point. He argues that they're "completely irrelevant" -- following short-term price movements just doesn't give you any useful information. In fact, it's more likely to give you something to worry about, needlessly.

I'd add this caveat: This only works if you have very long-term investments! Not all portfolios are built to run 15 years or longer with no more maintenance than the occasional trade or rebalance -- in fact, most aren't.

How do you do that?

Construct a long-haul portfolio

Ferri is a proponent of indexing -- of using index funds and ETFs in your retirement portfolio. That’s one way to build a long-term investment strategy. Another way, one likely to yield far greater returns if done right, is to buy great stocks -- the blue-chip dividend monsters and future giants that will keep delivering rewards year after year. (Can you guess which method I favor?)

Of course, "buy stocks" isn't a complete to-do list. To maximize your gains over the long haul, you need a solid asset-allocation plan -- one that gives you exposure to all the key corners of the stock market. Your 401(k) provider can probably help you come up with a decent one -- though as a rule, those computer-generated templates tend to be more conservative than is appropriate for most young investors.

A far better set of asset allocation roadmaps for retirement investors -- one of the best I've seen, and one that works well whether you're using mutual funds in a 401(k) or stocks in an IRA, or a combination of the two -- are the ones maintained by the team at Rule Your Retirement. They're available to members by clicking on "Model Portfolios" under the Resources tab after you log in.

What do the unfolding financial crisis and ongoing market volatility mean for your money? The Fool's here with answers. Fool contributor John Rosevear owns share of Apple. Southern Company and Johnson & Johnson are Motley Fool Income Investor selections. Nokia is a Motley Fool Inside Value pick. Apple is a Motley Fool Stock Advisor recommendation.

http://www.fool.com/personal-finance/retirement/2008/12/08/under-50-do-this-or-youll-regret-it.aspx

Who said it is impossible to make $$$$$ in bear market?

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Dear 陈全兴,

there r 2 choices for one to invest in bear mkt,

1) Buy high dividend yield blue chip stock esp those traded with PE < 10.

2)even if they r not high dividend payer, buy if blue chip selling to u @ around 7+-, it is still worth 4 consideration.

try to avoid property ,GLC n construction stocks, if u doubt , let see what happen to their shares price by end of this year or begining of next year ^V^

Oil n gas srctor also not a bad choice but u r advice to bottom fish them @ PE < 10 also for safe play.


http://www.samgang.blogspot.com/

http://samgang.blogspot.com/2008/07/v-who-said-it-is-impossible-to-make-in.html

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