What is a blue chip in stock market?

Here’s an interesting account from what Sir Gus Cosio has to say about blue chip in the stock market.

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"The term "blue chip" as I recall, arises from the white, red and blue chips that poker players use instead of cash. White chips are the smallest denominations and are normally used for ante. The red chips have the second largest denomination while the blue chips are the largest. The logic of poker players is to be able to stay in the game as long as they can because the chances of being dealt a very high hand would increase as the game progresses. For this reason, poker players keep the blue chips for high probability winning hands. Hence, the term blue chips in stock investing implies the high probability of profit or the sure thing. Technically, traditional fund managers define blue chips as stocks that have proven earnings model, regular dividend payout and steady growth prospects. Blue chips do not remain blue chips all the time. Some examples in the US are General Motors and Ford. Harsh economic conditions can alter the fortunes of even the strongest companies. AAPL, for one was a NASDAQ company for a long time, now it is the largest market capitalization in the world at 600 billion. In short, the term blue chip should be appreciated in both the intrinsic and extrinsic conditions of companies. This should tell you that there is no substitute for a regular review of investments in your portfolio. Blue chips may turn it's color."

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