While there can be many definitions of 'blue chip' stocks, one widely held view is that the 20 largest corporations can be considered 'blue chips'. In some ways it's the equivalent to the Dow Jones Industrial Average, whose constituents are the 30 largest US listed-corporations.
The following three constituents of the S&P/ASX 100 Index (Index: ^AXTO) (ASX: XTO) are widely owned by Australian investors and also have significant market share in their respective industries; however, their profitability and shareholder returns have been a mixed bag this year with only two of the three managing to outperform the 16.2% return from the index.
AMP (ASX: AMP) shareholders have seen their shares fall 1.7%. The insurer and wealth management firm, which operates on a December financial year, reported half-year results of $440 million, a fall in profits of $44 million on the prior corresponding period. For investors, AMP's increased claims within its wealth protection division was cause for concern, particularly given expectations that there are further issues ahead and has been a major factor in negative sentiment towards the stock this year.
QBE Insurance (ASX: QBE) shareholders have seen their shares rise 42.8%. QBE, which also operates on a December financial year, reported a dramatic fall in half year cash profits to US$590 million from US$844 million. The fall was largely attributed to a $289 million decline in investment income due to lower interest rates the year before. With QBE undertaking a restructure program that is expected to significantly lower the cost base and with the market looking ahead to a time when interest rates rise, the stock price has headed higher this year in anticipation of improved future results.
Origin Energy (ASX: ORG) shareholders have seen their shares rise 21.8% over the past 11 months with the diversified energy firm reporting a 15% fall in underlying profit of $760 million for the year ending 30 June 2013. The retail division was a major contributing factor in the fall in profits however with the Asia Pacific LNG Project nearing completion and entering production, investors' attention has turned to the APLNG 'game-changer' which has helped the stock price rally.
Foolish takeaway
Not all companies are created equally. Intelligent stock-picking can lead to investors outperforming the wider market, which means simply buying blue chip stocks such AMP does not guarantee an investor will outperform.
