Enterprising Investor Forum

The term ‘Blue Chip’ comes from the blue-colored poker chips which are typically the most valuable. Generally speaking, Blue Chip companies are well-established, have stable earnings and do not have extensive liabilities.

The main purpose of this screen is to give you some criteria to help you find a short-list of the best Blue Chip Stocks for new money now.

Here are some initial criteria that you can add to:

• Membership: Dow Jones or S&P500 index.

• Performance: Return on Equity above industry average.

• Growth: Est. EPS Growth next 5 years above Current Earnings Est.

• Liquidity: Current Ratio over 1.

• Strength: Debt-to-Equity Ratio below industry average

• Trading: near 52-Week Low.

Naturally, we are looking at companies in very different industry sectors and that is why, where possible, we propose to compare against the industry average. Furthermore, please remember that especially due to the fact that we added ‘Trading near 52-Week Low’ as a final criteria – to allow us to find out of favor stocks – you have to carefully conduct your desk research as some negative recent developments could be rightly depressing the stock price and possibly drive it down even further.

When we ran the screen without any additional criteria, Johnson & Johnson was ranked in 3^rd place. To read what we think of JNJ, please click here.

Good Screening!