Where Does the Term Blue-Chip for Stocks Come From?

Where Does the Term Blue-Chip for Stocks Come From?
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The term "blue-chip" is often used in reference to stocks, but who first used the term, when it was first used, and what that person meant to convey all remain in doubt. Over time, the meaning has diffused and mutated. In financial discussions, various meanings are assigned to the term, some detailed and specific.

Where "Blue Chip" Came From

CNNMoney reports that the term "blue chip" is an analogy for blue chips in gambling. Traditionally, poker chips came in red, white and blue, and the blue chips were the most valuable. This is no longer true. Contemporary gamblers often use five colors, with both green and black now worth more than blue, but the term remains in popular usage, and has come to mean something like "the best," or "the most highly regarded."

Early Uses of "Blue Chip"

Financial writers assign first use of the term "blue chip" to different historical periods. Some writers, like Ken Kurson in "Money Magazine," write that the term was first used "at the start of the twentieth century." Others write that it began "decades ago," or "in the early twentieth century." Bill Mann, writing in "The Motley Fool," and Brendan Koerner in "Slate," both believe that the first use was in 1904. None of these writers gives any evidence for their statements, or a narrative account that gives the first use some context.

First Use in 1923 or 1924

The first narrative account of the term's use appeared in a 2008 Dow Jones internal memo, which afterward circulated widely. According to the memo, the term was first used by early Dow Jones staffer Oliver Gingold "in 1923 or 1924." Standing by the stock ticker at the firm that later became Merrill Lynch, Gingold noticed several trades coming over the ticker at $200 or more per share, and said to Lucien Hooper of W.E. Hutton that he was going back to his office "to write about these blue-chip stocks."

Mutations and Uncertainties

Over time, the meaning of "blue chip" in reference to stocks has mutated. From the Dow Jones memo it's clear that Gingold meant "most expensive," and then, perhaps implicitly, "highest quality." Financial writers have become almost too specific, and assign meanings that express their personal investment preferences. An "Inc." article, for instance, defines a "blue chip" as the stock of a company with "strong executive management teams that make intelligent growth decisions and...[offer]... high-quality products and services." Doubt remains about when the term originated. The Dow memo was published 75 years after the event, and there apparently is no contemporary account. Also, as Koerner points out, by the early 1920s, when Gingold supposedly referred to expensive stocks as "blue chips," black or brown poker chips were more valuable than blue.