blue chip

Blue chip stocks are well-established companies that have demonstrated their financial strength through good times and bad. They typically pay dividends, and are considered to be less risky, based on their historical patterns. There are many blue chip stocks in the consumer sector. Typically, the strongest of these companies sell staples, like soap, beverages and soup, that consumers must buy no matter what the economy is doing. Strong consumer blue chip stocks share a number of characteristics. These include geographic diversity (which helps protect them from regional economic problems), a record of rising cash flow and a strong balance sheet....

We noted with interest (and some amusement) the unveiling of the prototype of “The Rationalizer,” a new device that aims to sense day traders’ stress levels and alert them when it may be time to step back from trading. The idea is to ensure that traders avoid the mistake of trading based on emotion. The device is made by Philips Electronics (symbol PHG on New York), one of the blue chip stocks we’ve taken a close look at in the most recent issue of Wall Street Stock Forecaster (see below for a full update on this Netherlands-based electronics firm). The Dialogues Incubator, an initiative of Dutch bank ABN AMRO, also played a role in its design. Users of the device wear an “Emo Bracelet,” which senses a trader’s stress level and makes the accompanying EmoBowl, which sits on the traders’ desk, change from yellow to red as the trader becomes more stressed....

During the 1990s, many investors held to a fixed idea that global stock market equities would be more profitable than North American stocks. This was especially true, so they claimed, of companies based in China, India and other emerging markets. We advised our readers to resist investing heavily in emerging markets during those years. Instead, we recommended that investors look to their U.S. holdings, and the buys we recommended in Wall Street Stock Forecaster, for overseas exposure. U.S. blue-chip stocks operate in many countries. And we felt that the domestic U.S. market offered opportunities that simply weren’t available in Canada. In the end, this advice paid off handsomely for our readers....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

We recently read the Yahoo news story of Ddalgi (Korean for “Strawberry”), a five-year-old parrot from Papua, New Guinea, who competed with 10 human investors in a stock-picking contest in South Korea. Strawberry’s stock market picks reportedly posted a 13.7% return. While not good enough for first, the result put her in a respectable third place. Her human competitors, on the other hand, posted an average loss of 4.6%. (The story reminded me of a Globe and Mail stock-picking contest in which I was pitted against eight other human competitors and a plastic Santa. More on that in a moment...) Stories like these are not uncommon, and are not limited to stock-picking contests. You may have heard of Maggie the Monkey, who makes yearly hockey playoff picks that routinely beat those of human analysts....

Some investors get pessimistic about the stock market when they see selling by insiders in the U.S. blue chip stocks that they hold. The value of insider buying and selling as a market indicator seems self-evident. After all, company insiders — officers, directors, or owners of 10% or more of a company’s stock — are apt to know more than outsiders do about what’s going on in their business. Insiders in the U.S. have to report buying and selling to the Securities and Exchange Commission (SEC). Many advisors claim that they can detect valuable investment opportunities, including rising blue chip stocks, by studying insider data. But the deeper you look, the more you’ll find that this data leads to muddled conclusions at best....

We’ve always believed that investors should sell a stock if they have any doubts about the integrity of the people who are in charge of the company. In other words, if you think a company is run by crooks, you should sell the stock right away, no matter how attractive it seems as an investment. As the Madoff scandal so clearly shows, there are no limits to the ways in which unscrupulous operators can abuse and cheat you if they are inclined to do so. Over the years, we’ve refrained from recommending, or advised selling, a number of stocks, including blue chip stocks because we felt their capital structure or promotional materials were designed to make it easy for insiders to mislead or take advantage of the investing public. We didn’t miss much as a result; in fact, we sidestepped some ugly situations. To profit from this rule — that is, to use it to enhance your long-term returns, not just avoid losses — you need to apply it in a moderate fashion. That is, you need to distinguish between lack of integrity on one hand and naiveté, or poor judgment, on the other....

These five large funds — one from each of Canada’s big-five banks — have suffered over the last year. That’s because they were heavily weighted toward financial services and resource stocks. Financial services companies are still dealing with tight credit markets. As well, the recession has cut demand for resources. This, in turn, has driven down the prices of resource stocks. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors.You should also ensure your investments are diversified within each sector. These five funds continue to stick to high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

BMO EQUITY FUND $20.70 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ontario, M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) mostly invests in blue chip Canadian companies. The fund’s managers aim to identify stocks based on their analysis of the outlook for the industry the firms operate in, as well as their earnings records, management strength and growth potential. The $1.4-billion BMO Equity Fund’s 10 largest holdings are Bank of Nova Scotia, Royal Bank of Canada, Toronto-Dominion Bank, Canadian Natural Resources, Suncor Energy, EnCana Corporation, Barrick Gold, Manulife Financial, CIBC and Goldcorp. The fund currently holds 35.9% of its portfolio in the resource sector. Its next-largest segment is financial services, at 21.6%....