Topic: Blue Chip Stocks

Discover how to zero in on the top companies to invest in right now for growth & value

borrowing money to invest in the stock market

Recognize that the top companies to invest in right now can include both growth and value stocks—but above all, most of them should be blue-chip stocks

We feel most investors should hold a substantial portion of their investment portfolios in securities from blue chip companies. These stocks could offer good “value”—that is, they should trade at reasonable multiples of earnings, cash flow, book value and so on. Or, alternatively, they could have above-average growth prospects.

Find the best blue chip investments and you’ll find the top companies to invest in right now

High-quality blue chip companies are good to invest in. Blue chip companies are typically defined as firms whose stocks have a national reputation for quality, reliability and the ability to operate profitably in good times and bad.

You can still look at blue chips as the strongest and most secure stocks on the market. Just be sure you look at the stock’s qualities and not just at the label. That’s because some blue chips only get their reputation through a strong public relations effort or by being in the right industry or business situation at the right time and place.

When assessing blue chip companies that are good companies to invest in, you need to ask: What are they doing to remain vital? These companies hold strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace.

Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones–the good companies to invest in–offer an attractive combination of reasonable p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

Stocks with both growth and value potential that fall into the blue chip category are among the top companies to invest in right now. Here’s how to spot those stocks:

True Blue Chips pay off

Learn everything you need to know in 'The Best Blue Chips for Canadian Investors' for FREE from The Successful Investor.

Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CAE Inc. Stock and more.

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The top companies to invest in right now should include some growth stocks to bolster your investment portfolio

Top growth stocks have hidden assets that can make a world of difference in the long term. They are also a key part of our Successful Investor approach. One example of hidden assets is real estate.

Another example of hidden assets is research and development spending. Technology companies spend large sums of money developing new practices and technologies that can change the world of the future. This research may not pay off for decades, but if you’re a keen investor, you can see via their income statements what companies spend on research and development.

Top growth stocks will typically be multi-product companies. Technological advances, for example, come in spurts and tech companies tend to leapfrog each other. Focus on tech growth stocks with a variety of existing or soon-to-be-released products and avoid one-hit wonders.

Growth stocks to invest in often focus on up-and-coming technologies. For this, you need to know how technology is changing. Read and absorb the latest tech blogs. Learn about the technologies that driving growth for tech companies. For instance, increasingly pervasive use of wireless devices is raising demand for faster and faster wireless networks.

Search for overlooked value and you can find some of the top companies to invest in right now

One of the key principles of our Successful Investor approach is to buy high-quality “value stocks”—stocks that are reasonably priced, if not cheap, in relation to their sales, earnings and assets.

Savvy investors know that value stocks can offer the highest dividend yields, along with steady growth. If you want to find the best value stocks to buy now, it’s important to understand the qualities they have in common and to know which financial ratios you can use to find them.

Blue chip value stocks to buy and hold in your portfolio all have one thing in common: They give you reason to believe they might be worth holding on to indefinitely.

Most of these stocks have an established business and a history of sales gains, plus some earnings, if not dividends. To put it more simply: these stocks have a clear business plan that seems to be working.

Use our three-part Successful Investor approach to build a diversified portfolio of solid investments—including top companies to invest in right now

  1. Invest mainly in well-established, dividend-paying companies.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities.
  3. Downplay or avoid stocks in the broker/media limelight. When stocks spend time in the limelight, they tend to become overpriced, and this leaves them vulnerable to a sharp downturn with any hint of bad news. Instead, look for stocks with hidden value that are less widely recognized—at least so far—as attractive investments.

What is your experience with “blue chip stocks” that didn’t deserve that label?

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