What constitutes a Blue Chip Share?
‘Blue Chip’ shares are generally considered to superior investment choices. This comes about from a monopoly or oligopoly market position, leading to reliability of profits, share price growth, dividends, business longevity and a degree of customer loyalty.
Most online lists purporting to identify the Australian Blue Chips throw up this list, which is simply the top 10 ASX listed companies by market capitalisation value, in alphabetical order. The largest of these is CBA.
- BHP Group Limited (BHP): $169 billion
- Rio Tinto Limited (RIO): $176 billion
- Commonwealth Bank of Australia (CBA): $185 billion
- Westpac Bank Corporation (WBC): $83 billion
- ANZ Group Holdings Limited (ANZ): $53 billion
- National Australia Bank Limited (NAB): $69 billion
- Insurance Australia Group Limited (IAG): $12 billion
- Woodside Energy Group Ltd (WDS): $68 billion
- Telstra Group Limited (TLS): $32 billion
- Wesfarmers Limited (WES): $55 billion
Our analysis will show that investing in many of these companies on the basis of the size alone can be shown to have been a very bad choice. BHP for example, the ‘Big Australian’ while providing briefly very impressive dividends some years ago, is up just 10.8% over the last 5 years, as of January 2025, while the ASX200 has grown 17.6%. These values represent a CAGR of just 2.1% and 3.1% respectively. When taking into account BHP dividends, the return improves significantly, however it is still a figure that has rarely made double digits.
With inflation over this period somewhere between 2% and 7%, nett returns have been dismal. Yet people are still buying BHP shares. Go figure!