Blue Chip Penny Stocks

The phrase “blue chip penny stocks” almost sounds like a contradiction of terms. So what does it actually mean? Basically, it’s referring to stocks that are normally considered to be “blue chip” stocks; i.e., stocks that trade on the major exchanges such as the NYSE, stocks that represent large corporations, but have had a major downturn in price, to the point of being traded for less than five bucks per share. For the uninitiated, the general definition of penny stocks is any stock whose price is less than $5.00 per share. OF course, there is some debate about the actual price level that a stock should be at to be considered a “penny stock”, and some even argue that the stock needs to be under $1.00 per share to technically qualify for the title of penny stock, but the under $5.00 crowd seems to have the most sway, so we’ll go with that definition. For those who may not know, the origin of the phrase “blue chips” when referring to stocks actually comes from the gambling world; the blue chips were well known as the most expensive chips in the Monte Carlo casinos, and were considered to be the “best bet” chips. This is where the whole phrase came from to begin with. Now, large, well-established and reputable (if there is such a thing anymore) corporations are generally considered to be the “blue chip” issues, due to the large market capitalization and supposed “bang for the buck” that they provide. Normally, a blue chip stock will trade far above the $5.00 per share level, and even into the hundreds of dollars per share (or, in the case of Berkshire Hathaway, thousands of dollars per share), so there is definitely a stronger sense of value with blue chip stocks.

So what constitutes a blue chip penny stock? Well, in today’s economy, with even the larger companies being in the crapper as far as share prices are concerned, you can actually snap up shares of large corporations for insanely cheap prices nowadays. Due to the speculative meltdowns of practically every major market in recent months, there are some serious bargains to be had if you do a little research. Not making any recommendations here, but I did want to point out some examples of blue chip companies whose share prices are in the crapper (as of this writing, in April of 2010): Look at the price chart for Ford Motor Co. (NYSE: F)—a year ago this time (in April of 2009), Ford’s share price was between $3.00 and $5.00 a share all through the month. Now it’s selling for around $13.00 per share. Folks, if you read between the lines, not all people are being affected by the recession. Some people are getting nasty stank rich right in the middle of this recession by getting in on stocks that aren’t “popular” at the time, but have great potential for rebounding. There was actually a time in late 2008 when Ford was at $1.00 a share—are you kidding me???!!??

There are several other stocks that followed this path during the economic meltdown of 2008 & early 2009—stocks like AIG, Citigroup, GM, Kodak, Bank of America, etc…they were all trading for less than $5.00 per share only a short time ago. So, my suggestion is that you keep your eyes peeled for other blue chip penny stocks to capitalize on during this crappy economic time—you’re sure to find some diamonds in the rough.