Historically, the name bluechip was used for the highest denomination chip, while playing poker – the card game. However, with other high-value chips coming in with time, bluechips became obsolete, but the name bluechip is still used today while referring to the companies that are of high value, giving reliable returns and profits irrespective of the market volatility.
Thus, Bluechip stocks are stocks that have a strong track record in the market. These companies are known for their stability in turbulent times and typically are the leaders of their respective industries/sectors.
In this article
- Why Bluechip Funds Offer Good Returns?
- Why Must Your Portfolio Comprise Bluechip Funds?
- Top Bluechip Funds Recommended By Groww
Why Bluechip Funds Offer Good Returns?
Following characteristics are typically seen in a bluechip company –
1.They have lower debt ratios
2.Diversification in revenue helps to compensate for the loss that may arise in any of the verticals. It also helps to curb fluctuation which provides adequate profits to the investor.
Why Must Your Portfolio Comprise Bluechip Funds?
1. Stable and Consistent Returns
Bluechip companies typically have stable and consistent earnings growth that translates to increased investor’s confidence. These companies typically have strong management who are competent and manages the business with a typically high degree of integrity.
For an investor, stable earnings of such companies contribute decent returns to their overall portfolio and minimize risk.
2. Timely Payment of Dividend
Now, what many people are unaware of is that a lot of bluechip companies pay a dividend that contributes to the additional source of income. Mutual funds that invest in bluechip companies have a high stake and thus, they reap a good dividend. This dividend, when passed on to retail investors, provide them with additional capital.
3. They Are Financially Sound
Bluechip companies are known for their financial strength. These are the companies that are the largest in the sector and maintain a healthy debt to equity ration (also known as leverage). This lowers the volatility in stock prices and reduces the risk as well. Mutual funds comprising of bluechip companies help in moderating the overall risk profile of the portfolio.
4. Diversifying Risk
As I have mentioned above, bluechip companies are known for their stability and thus it adds value to the portfolio if the investor is risk-averse. Bluechip companies typically invest in a well-diversified business with multiple streams of revenue and a wide demographic base. This mitigates risk.
5. Strong Goodwill
Bluechip companies seem to have a competitive edge over other companies. These companies also feature in the Fortune 500 list, thereby providing that extra safety to the overall portfolio.
Top Bluechip Funds Recommended By Groww
Some of the good bluechip funds are detailed as under:
The open-ended fund adopts bottom-up stock selection approach and picks fundamentally sound companies that are trading at substantial discount to their intrinsic value. The fund has the objective of long-term capital appreciation and seeks to stay away from momentum stocks for any short-term gain.
The portfolio has generated healthy returns historically and comprises of companies with a rich valuation. In addition, the fund manager seeks to maintain a balanced portfolio with a beta close to 1 to ensure that the fund performance is not carried away due to any adverse movement in the market.
The fund is rated five-star by Morningstar and is managed by Neelesh Surana since the inception of the fund thereby providing style/approach consistency.
The fund seeks to generate capital appreciation over long-term by investing in companies that are trading at a substantial discount to its intrinsic value. In the past, the fund has successfully delivered a healthy performance over the multi-trailing time period. The fund follows a marginally conservative approacht as reflected in the beta of 0.88 times.
The fund is ranked four-star by Morningstar and it is managed by Ms. Sohini Andani. Sohini is the Head of Research at SBI and has considerable experience in the past with companies including ING Investment Management Pvt. Ltd. and CRISIL Ltd. Sohini is a Chartered Accountant and holds a B.Com. degree.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.