According to experts, blue chip stocks are said to be safer to invest in stocks when compared to other types of stocks. What is really special about blue chip stocks?

Definition of blue chip and its origin

According to the New York Stock Exchange, the definition of a blue chip is a stock of a company that has a national reputation in terms of quality, ability, and reliability to operate profitably in various economic situations including in adverse conditions.  Simply put, blue chip stocks are a type of stock that has a large market capitalization, the figure reaches above IDR 10 trillion, blue chip stocks are also often referred to as first-tier stocks. Of course with such a large stock market value, blue chip stocks are made up of large companies with excellent performance.  Usually, companies listed on blue chip stocks are companies engaged in industries where the results are needed by many people. The high demand and need in the community for the products of these companies, makes this blue chip stock category company have great profits that are routinely distributed to investors. So it is not surprising if blue chip or big cap stocks are interpreted as top stocks or flagship stocks. The term blue chip itself originated from the game of poker. Well, in the game of poker, blue coins (chips) have the highest value compared to red and white. The term blue chip is widely used and known in the stock world after being introduced by Oliver Gingold.  Gingold introduced the term when he was on the stock exchange and witnessed stock trading at that time. From the stock movements he saw, Gingold felt interested in stock transactions which were quite fantastic with a value of $200-$250 per share. These stocks are of great interest to investors.  After that, Gingold returned to the office and told his friend to write down blue chip stocks. From there, the term blue chips until now is famous and used by those who play stocks.

Characteristics of blue chip stocks in the stock market

If you are a beginner investor, there are several characteristics of blue chip stocks that you can recognize very easily such as the following.

1. Large capitalization

Simply put, capitalization is the market price of a company if someone wants to buy it in its entirety. The capitalization can be calculated by multiplying the stock price by the number of shares outstanding in the market. Usually, blue chip stocks have a large capitalization of above IDR 40 trillion. However, if there is a company with a capitalization of IDR 10 trillion or more, it can be said to be large. Meanwhile, if the capitalization is between IDR 500 billion to IDR 10 trillion, then the shares are categorized as second-tier stocks. Then, for prices of IDR 500 billion and below, it is included in the category of third-tier stocks.

2. Crowded

Many investors, both individuals and institutions own and trade blue chip stocks. Stocks that fall into the blue chip category are also always included in the most active list on the stock exchange and are included in the LQ45 index category. What is LQ45? LQ45 is an index that contains liquid stocks or stocks that are widely traded, and the average blue chip stocks are in the index.

3. Regularly distribute dividends

Companies that own blue chip shares will regularly distribute dividends. Dividends themselves are the profits generated by the company, then given to shareholders consistently. Every year, the company provides profits as a form of appreciation for the support of these shareholders.

4. Solid company performance

The latter characteristic of blue chip stocks is that they have a solid record of corporate performance. For example, the profits generated are consistent, have quality products and are loved by the community, and the company continues to grow every year. In other words, blue chip companies are not easily shaken and bankrupt even though the economic situation is in crisis.

5. Current liquidity

Blue chip stocks also have good liquidity. Usually, this liquidity is influenced by the number of shares owned by the public or circulating on the exchange. The more public shares are owned, the more liquid the shares are. Stocks that fall into the blue chip category have usually been listed on the Indonesia Stock Exchange for a long time, with a minimum period of five years.

Do blue chip stocks bring a lot of profit?

The large capitalization of blue chip stocks makes these stocks tend to move steadily and not too wildly. You don't need to be afraid to invest in blue chip stocks because companies whose shares are classified as blue chips are no longer growing companies, but are already included in established and strong companies. This type of stock is perfect for those of you who want to invest for the long term, so indeed most people keep blue chip stocks for the long term. When market movements are uncertain, blue chip stocks usually tend to be stable. However, it does not mean that blue chip stocks will not experience a decline, but blue chip stocks usually recover the fastest compared to small or mid-cap stocks. However, investing in blue chip stocks requires higher capital because usually the price per lot is higher than other stocks.

List of blue chip stocks 2021?

On the Indonesia Stock Exchange, there are 45 companies that can be said to have blue chip stocks known as the LQ45 index. Companies included in the LQ45 list will be evaluated periodically every six months. After that, the company will be ranked or benchmarked. What are the blue chip stocks on the IDX?

1. PT Bank Central Asia Tbk. (BBCA)

Who doesn't know BCA bank? BCA is the largest private bank in Indonesia. BCA is indeed one of the best banks in Indonesia. This bank is also classified as one of the best banks with the most extensive network and a very large number of customers. This banking company is very well managed, effective and efficient, this is reflected in the highest ROA or return on assets among other banking companies.  BCA shares with the code BBCA have a volume of 11,378,100 shares with the last share price at the time of writing this article of IDR 31,750.   In 2020, Bank BCA distributed the final dividend of 2019 books of IDR 455 per share. Previously, the IDX had paid an interim dividend of IDR 100 per share in December 2019. So the total dividend given by BCA is IDR 555 per share. With their solid fundamental status, BBCA is the blue chip stock of choice for many investors.

2. PT Bank Rakyat Indonesia (Persero) Tbk. (BBRI)

The next blue chip stock that is in great demand by many investors is Bank BRI or BBRI shares. BBRI shares have a good performance and are classified as active in stock exchange trading. BBRI shares have a market capitalization of IDR 372.35 trillion as of March 31, 2020. In fact, the number of BRI shares outstanding in the market reached 123,345,810,000 with the last share price at the time of writing this article was IDR 4,130. Well, one of the factors that affects the performance of BRI shares is the strong commitment to continue to provide credit to small businesses such as MSMEs. BRI also often conducts stock splits which aim to attract public interest in this stock. The last time the stock split was carried out was in October 2017, where BBRI shares reached a value of Rp15.00 per share and the management agreed to carry out a stock split to 1:5. In 2019, BBRI shares distributed dividends with a total of IDR 20.63 trillion or equivalent to 60% of 2019 profit. BRI's credit growth is very consistent, as the bank with the second largest asset after BCA, BRI recorded stable credit growth above the industry, thanks to the MSME market share where BRI plays with very few competitors.

3. PT Unilever Indonesia Tbk. (UNVR)

Known as the largest consumer goods company in Indonesia, Unilever's ROE or return of equity reached 142 percent in 2018 and since 2014, Unilever's ROE has always been above 100 percent. The company's profit, whose shares are known by the UNVR code, always increases every year and reached Rp9 trillion in 2018. ROE proves the company's ability to generate profits from every equity given by shareholders. A figure above 100 percent means that from every one rupiah of capital of UNVR management shareholders can provide a profit of more than one time of capital. UNVR blue chip stocks can almost be said to have no bank debt, because their income is very large compared to the company's assets which shows the efficiency of the company's operations when running a business. UNVR's share price moved from IDR 1940 per share in 2003 to IDR 54,400 in January 2018. In 2019, they distributed dividends with a value of IDR 430 per share with a total of IDR 3.28 trillion. 

4. PT Telekomunikasi Indonesia (Persero) Tbk. (TLKM)

As you know, PT Telekomunikasi Indonesia is a state-owned company engaged in telecommunications. Having been serving the Indonesian people for a long time, the market capitalization of shares with the TLKM code as of March 31, 2020 is IDR 313.04 trillion with a total of 99,062,216,600 shares outstanding on the IDX. TLKM has consistently managed to obtain net profits from year to year despite uncertain economic conditions. Telkom's ROE continued to grow by 22.03 percent. The company also routinely distributes dividends to shareholders every year. In 2018, Telkom paid dividends of Rp16.2 trillion or 90 percent of profit. In the last 10 years, Telkom's dividend has increased from 40 percent to 90 percent of profit. Companies that distribute dividends consistently are the characteristics of companies with good performance, because dividends are impossible to distribute if the company's performance is poor, because surely profits are withheld and allocated to improve performance.

5. PT Indofood Suskes Makmur Tbk. (ICBP)

Who doesn't love eating instant noodles? The food that is identical to this boarding house turns out that the company's shares are in the blue chip category! The company, which is famous for its indomie products, is well-established and has good fundamentals. The company's revenue growth continues to grow consistently from year to year. The company was able to generate profit with ROE of up to 21 percent and ROA of 13.7 percent. This figure is above the average stock of food producer companies that are listed on the stock exchange. In 2019, Indofood distributed cash dividends of IDR 171 per share with a total of IDR 1.5 trillion.  ICBP shares are classified as blue chip stocks that are safe to invest in because they have good growth and have a name or brand that is proven to be of high quality. This stock is also worthy of being a long-term investment.

6. PT Astra International Tbk. (ASII)

The company, known as the Honda brand, actually has 6 business lines, namely automotive, financial services, heavy equipment, information technology, infrastructure, and logistics. The company is also supported by subsidiaries engaged in the assembly and industry of automobiles, motorcycles, and spare parts, heavy equipment sales and rentals, mining and services, plantation development, financial services, infrastructure and information technology. Throughout 2019, ASII posted a net profit of Rp21.7 trillion. That is why Astra's shares are worthy of being 'collected' because they have high capital gain potential, especially during a pandemic like this, when the stock price falls, Astra shares can be bought at a cheap price. Later in the long term, this blue chip stock has the potential to continue to increase because it has good fundamentals. 

7. PT Perusahaan Gas Negara (Persero) Tbk. (PGAS)

The next blue chip stock is the State Gas Company (PGN), PGAS is an Indonesian national company engaged in natural gas transportation and distribution that plays a role in meeting domestic natural gas needs. Currently, the Government of Indonesia itself owns 56.96 percent of the total PGAS shares, which means that it is equivalent to 13.8 billion shares through PT Pertamina (Persero).  PT Perusahaan Gas Negara Tbk or PGAS recorded revenue of 3.84 billion US dollars or Rp 54.4 trillion with an average exchange rate of Rp 14,148 / US dollar in 2019.  In accordance with the trend, PGN's revenue showed a positive trend from 2012 which amounted to 2.58 billion US dollars and continued to increase until 2014.  Although it had dropped to 2.9 billion US dollars in 2016, it rose again in 2017 and 2019.

8. PT Gudang Garam Tbk. (GGRM)

Gudang Garam is a well-known cigarette company in Indonesia that has been established since 1958. Gudang Garam products vary greatly, ranging from klobot clove cigarettes (SKL), hand-rolled clove cigarettes (SKT), to machine-rolled clove cigarettes (SKM). With a total of 423,200 shares outstanding, GGRM's share price at the time of writing this article is IDR 32,295. Despite the pandemic, cigarette sales in the second quarter of 2020 remained stable. In terms of valuation, Gudang Garam is also quite attractive even though people's purchasing power is declining at the moment.

9. PT Bank Negara Indonesia Tbk. (BBNI)

Another blue chip stock that is worth owning is shares from Bank BNI with the stock code BBNI. Bank BNI is one of the state-owned banks that already has a name in Indonesia. PT Bank BNI was founded in 1946 which at that time focused on corporations, retail, and consumers. The company also has subsidiaries engaged in insurance, finance, and securities. IDX noted that BBNI shares lead the list of the most active stocks most targeted by foreign investors. The total share purchases by foreign investors of BBNI reached 8.25 million shares. The COVID-19 pandemic has caused several blue chip stocks to experience a significant price correction from the normal price. However, experts say that now is the right time to invest because if conditions are normal, BBNI's share price will recover. For this reason, BBNI shares are suitable for long-term investment.

10. PT Bank Mandiri Tbk. (BMRI)

Another blue chip stock that you need to know is Bank Mandiri or BMRI shares. Bank Mandiri's stock performance last year was recorded to grow 9.9 percent compared to the previous year and had a net profit of IDR 27.5 trillion. Bank Mandiri tends to be stable because it is able to balance credit growth and net profit. In addition, Bank Mandiri also has a long-term performance with stable returns, making it suitable for long-term investment. This is also in line with Bank Mandiri's position as one of the largest banks in Indonesia.

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