When the term blue chip is thrown around, many investors hear synonyms like stability and success. Other definitions limit blue-chip stocks to the 30 companies comprising the Dow Jones Industrial Average.
However, blue chip stocks should be considered as those representing long-running and well-established companies that prioritize their financial health.
Moreover, these companies typically command a market capitalization numbering in the billions or even trillions of dollars. This ensures both the volume of outstanding shares and their value is capable of protecting investors from severe market volatility.
Ultimately, these company stocks are both trustworthy and well-known among consumers and investors alike.
Unfortunately, no company’s success lasts forever, as the complex nature of the market and business landscape requires constant evolution. Even as the current U.S. stock market trends toward growth, earnings misses and revenue losses are possible for any major company.
As such, investors might want to think about which blue chip stocks to sell should the market trends reverse.
Home Depot (HD)
Once a staple of the American dream, Home Depot’s (NYSE:HD) status as a company has waned in the last decade. Known for its bright orange and expansive warehouses, Home Depot once offered customers a unique set of services. It was particularly special for customers who wanted to take home improvement into their own hands.
Additionally, the original business model of Home Depot represented more than just a store. It was once a place people could go to be advised on best practices and products while improving their homes. Today, the reality has changed. Home Depot is accused of mistreating its employees and repeatedly short-changing the customers who once trusted it so much.
Between a class action lawsuit and a series of losses in last quarter’s earnings report, HD’s status as a blue chip could be questioned. That’s because it’s not just about a company’s financials, but rather consumer trust and reputation that made a company like Home Depot a blue-chip.
Amgen (AMGN)
One of America’s leading pharmaceutical companies, Amgen (NASADAQ:AMGN) has earned a mixed opinion among Wall Street analysts. Between contracting income for Q4 2023 when compared to the prior year, and a questionable foray into weight loss drugs, the stock is one of the less attractive blue-chip options right now.
On top of that, the stock’s overall value is down 6.6% in the last six months, underperforming in a relatively hot bull market. While a couple of rocky quarters should not send investors running, it does beg the question, where is Amgen headed?
As a stable and established company, Amgen already has several successful drugs on the market. However, to continually deliver for investors, Amgen’s growth may not be accelerating consistently enough.
With London & Capital Asset Management cutting its stake in Amgen by 5.4% in the fourth quarter, institutional investors may be seeing the decreased consistency as a sign to invest elsewhere.
UnitedHealth Group (UNH)
UnitedHealth Group (NYSE:UNH)’s sheer size and influence has the company remained as relevant as it has for so long. Yet, mounting reputational pressures may overshadow the company’s decent financial stability and size.
Essentially, most Americans disagree with the current healthcare process. Between prior authorizations and high deductibles, the health insurance landscape is practically unnavigable for the average American.
Now with a cyberattack and medical costs looming over the company’s Q1 earnings report, a hit could be inevitable. With the earnings call scheduled for April 16, 8:45 a.m. EDT, a potential market reaction could bring prices even further down. This, paired with an 7.2% drop in stock price over the last year, might make UNH one of the blue chip stocks to sell.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.