What is a Blue Chip Company?
A Blue chip company is a business that has a strong establishment, is financially sound and nationally recognized. Blue chip companies are famous for their high quality and widely accepted products or services.
Investors believe that they are profitable, reliable, and safer to invest in compared to startups. Blue chip companies are more likely to survive economic downturns and operate profitably. This contributes to their record of stable and reliable growth.
The term “Blue Chip” originates from the poker game where, unlike other colours of chips, the blue chip has the highest value on the table.
Characteristics of Blue Chip Companies
- Blue Chip companies generally sell widely used products or services.
- They are typically large companies with a considerable number of years in their industry.
- These companies have records of long term and stable growth.
- They pay regular dividends which grow over time.
- Their stocks are highly liquid.
- They have little or no debt.
- They are secure to invest.
Some of The Blue Chip Companies in Nigeria
1. Cadbury Nigeria Plc
Cadbury is one of the largest beverage and confectionery producers in Nigeria. Some of their products include Bournvita, TomTom, Buttermint and Clorets. They have a market value 14.09b and are currently trading at N7.50 on the Nigerian Stock Exchange.
2. Flour Mills of Nigeria
This company is one of the earliest to begin wheat milling in Nigeria. Famous for its brand, Golden Penny, it remains a favourite among confectioneries, bakers and consumers in Nigeria. It is valued at 86.11b and is trading at N21.00 per share on the Nigerian Stock Exchange.
3. Unilever Nigeria Plc
Unilever Plc owns over 400 brands that produce food, beverages, home and personal care products. Some of their products include Knorr, Lux, Axe, Omo, and Dove. They have a market value of 60.32b and are currently trading at N10.50 per share on the Nigerian Stock Exchange.
4. Guinness Nigeria
Guinness is renowned for its quality and has been on the Nigerian Stock Market since 1965. They are into the brewing and bottling of lager, stout and malt drinks. Some of their products include Guinness Gold, Foreign Extra Stout and Malta Guinness. They have a market value of 40.30b and are currently trading atN18.40 per share.
5. Nestle Nigeria Plc
Nestle Plc make food and beverage products. Their products include Maggi, Milo, Golden Morn and Cerelac. They have a market value of 745.26b and are currently trading at N920.20 per share.
6. Transcorp Plc
Transcorp is a leading conglomerate that focuses on the Oil and Gas, Power, and Hospitality sector. Some of their subsidiaries include; Transcorp Hotels, Transcorp Power, and Transcorp Energy. They have a market value of 26.83b and are currently trading at N0.66 per share.
7. Dangote Cement
Owned by Dangote Group, Dangote Cement is a fully integrated cement company that operates in Nigeria and about 14 other African countries. It is valued at N2,215.27b and is currently trading at N130 per share.
8. Nigerian Breweries Plc
With eight operational breweries in different parts of the country, Nigerian Breweries is the pioneer and largest brewing company in Nigeria. They have a market value of 239.91b and are currently trading at N30 per share.
9. Lafarge Africa (WAPCO)
Lafarge is a dominant figure in building materials and cement production. They have a market value of 187b and are currently trading at N11.80 per share.
10. Guarantee Trust Bank
GT Bank is one of Nigeria’s financial institutions with a large customer base. They have a market value of 618b and are currently trading at N21.00 per share.
Investing in a Blue Chip Company – Things to Consider
As an investor, the prospect of investing in a blue-chip company might seem very attractive. However, you should research the company as investing in a fancy brand name can lead to a considerable loss if you neglect proper analysis. Here are five tips to help you invest wisely
- Invest in companies with low debts because such companies are financially prepared to face economic downtimes.
- Go through the records (5 to 10 years) of the prospective blue-chip company you want to invest in.
- Diversify your investment portfolio by investing in at least five different primary sectors to reduce risks and maximize returns.
- Hire an experienced stockbroker to advise you and manage your portfolio better.
- Invest in quality stocks to ensure long term benefits.
Blue chip company stocks are not a suitable option for short term investments. This is because they are less risky and have slow but stable growth. However, if you are ready to invest in dominant brands for substantial returns over some time, buying stocks from a blue chip company will benefit you immensely.