BLUE CHIP STOCKS - CHIPS OF THE PAST?

By Ruma Dubey

There was a time when a father bought shares like ACC, Grasim, TISCO, Tata Motors and the likes; portfolio was all Tata and Birla companies. But this basically comprised the ‘blue chip’ stocks which the father hoped to use as an investment to use when his child wants to get married or wants to set up some business or wants to go abroad for studies. It was buying into stocks with the attitude – buy it and forget it. There was no daily stock tracking and they were pretty happy and content with the regular dividend payment. They did not worry about Corporate Governance issues or environmental concerns or political kow-towing; the names – Tata and Birla were enough to ensure that you had bought into veritable blue blood- royalty, which lasts forever.

Alas, those are also things of a bygone era. Today also the name of Tata and Birla evokes respect but it is not blind faith. The biggest change in the investing attitude is that people can no longer afford to buy and forget about the stocks; constant monitoring and keeping tab on news has become imperative if you own stocks. Also buying into these stocks and hoping to get your child married off with the money some 15-18 years down the line is unheard of – people could laugh at you if you said that your buying was with a 15 years horizon. Today, we cannot give guarantee of our own siblings and children, so what can we guarantee about companies and their management.

Thus today we need to ask ourselves whether the very concept of blue chips exist?  We know that Blue Chips mean fundamentally very sound stocks. Some say that blue chips could also mean stocks which are most expensive but all ultimately say that it conveys highest quality One does not know where and how this terminology was first used many say it is an analogy for the blue chips used in gambling or the poker game, where the blue colored chips were considered to be the most valuable. But today, this itself has changed – in gambling green and black chips have more value than blue. Yet, the tag of ‘blue chip’ for stocks continues.

So if were to look into ‘blue chip’ stocks today, which could those probably be? One could say that till a few years ago, it was ACC, now people prefer Ambuja. Infosys was like true blue blood but today it has fallen off the pedestal and many are looking at Tech Mahindra and even HCL with awe and TCS is spoken about with reverence.  Tata companies continue to be respected but in terms of growth or value, more than Tata Chemicals or Tata Motors, Tata Global or a Titan makes more sense. And Birla companies? Grasim, Ultra Tech and Hindalco to name a few, continue to remain sound stocks but very few would buy these stocks now with their daughter’s marriage in perspective. In fact Tata and Birla were replaced by Reliance and today this stock too seems to have lost some of its blue hue. Maybe five years ago, many bought into DLF as a blue chip but today, would you like to touch it even with a barge despite its large land banks across India? L&T continues to evoke that sense of ‘old world faith’ and so does HDFC and Maruti to some extent. It was the fashionable thing in olden days to buy Hindustan Lever, which is Hindustan Unilever today. But once again, the gain which the stock will leave on the table today has gone down and so has this infatuation with the stock.  Maybe we are looking anew at the sector and prefer desi companies like Emami or Marico, yet we are reluctant to categorize them as blue chip. Dr.Reddy’s remains one of the top notch pharma companies but look at the sorry story of Ranbaxy, which was bluest of the blue. Today new companies like Glenmark, Wockhardt, Lupin and Torrent Pharma have more hold on the markets.

The point here is that blue chip is today a moving target. Actually blue chip could probably mean only a good, sound company but we simply cannot buy and forget any sound stock, not even a Tata or a Birla. Thus it would be logical to say that the very concept of a ‘blue chip’ simply does not exist, like many other things of olden times like the snail mail, telegram, saaptahiki and Chhaya Geet on Doordarshan, video and audio tape, Kodak photo films, paper based voting, PCOs, telephone directories…. get the gist? These things and ‘blue chip’ stocks are relics of the past which our children and grandchildren might have a hearty laugh at.

Blue chips are chips of our past. What we see now is that in that sense time is a very misleading thing. All there is ever, is the now. We can gain experience from the past, we can hope for the future, but we don't know if there is one……