Top 10 blue-chip stocks to watch in the UK

What is a blue-chip stock?

Blue-chip stocks represent the largest, most mature, reputable and financially sound companies within a market. Blue-chip companies are usually leaders within their given sectors and have an established track record.

They are also included within a recognised index. For example, in the UK, companies that form part of the FTSE 100 – comprised of the 100 largest publicly-listed firms by market cap – are often referred to as ‘blue chips’.

However, while all blue chips are large-cap, not all large-caps are blue chips – and the constituents of the FTSE 100 change on a quarterly basis; so the smallest of the top 100 is likely not the same from week to week. Therefore, this article zones in on the largest blue-chip stocks in the UK, as of the second quarter of 2024.

Why do people invest in blue-chip stocks?

Many blue-chip stocks share characteristics that appeal to investors. Their size and stature mean they are often better able to weather economic downturns. They’re also able to offset any weakness in one market with a strength in another – so they can often post resilient earnings in times both good and bad.

This is because they usually operate on an international basis or have several different business divisions. They pay regular dividends and have a history of returning cash to shareholders, with many of the top blue-chip companies offering share buy-backs on a regular basis.

The stability and low-risk nature of blue-chip stocks make them a favourite for pension funds and large financial institutions because they are thought to offer shareholders the best possible liquidity.

How to invest in and trade blue-chip stocks

You can choose to either invest in a stock, or to trade it. When you invest, you own the underlying shares in the company outright and are entitled to any dividends that are paid; you also make a profit if the share price appreciates. With us, you can buy shares using a share dealing account.

Learn about the difference between trading and investing

Trading a stock enables you to speculate on the future share price’s movement of a stock – whether you believe it will fall (in which case you’d go short) or rise (in which case you’d go long).

You would not own the underlying shares and won’t receive any dividends, but you can use leverage. Leverage enables you to open a larger position with a small deposit (called a margin), which can help you stretch your capital a little further. However, total profits and losses could easily exceed your margin amount, as they are calculated on total position size, so you’re advised to trade carefully.

This can be achieved using the steps below:

1. Create or log in to your share dealing or trading account
2. Research the company you want to take a position on
3. Carry out technical and fundamental analysis
4. Set your stops and limits
5. Open and monitor your position

Find out the difference between CFDs and spread betting here

Top 10 blue-chip stocks in the UK

1. AstraZeneca
2. Shell
3. HSBC
4. Unilever
5. BP
6. GSK
7. Rio Tinto
8. Relx PLC
9. Diageo
10. Glencore

The list of the top ten blue-chips stocks in the UK, based on the largest companies by market cap. Most of them have been in the top 10 for years, if not decades, making them sound bets for long term investors.

They mostly produce vital goods, such as oil, metals, pharmaceuticals, or provide crucial services like banking and insurance, all of which are solid sectors to get exposure to.

Note that these are not necessarily the best, but they’re the biggest market cap and some of the most popular stocks among traders and investors. Past performance is not an indicator of future returns.

AstraZeneca

AstraZeneca is a multinational pharmaceutical titan, which is dedicated to the research, development and commercialisation of new medicines. The company works on a wide variety of therapeutic applications, including within oncology, respiratory, renal, cardiovascular, metabolic, and autoimmune diseases. At its essence, AstraZeneca exists to develop treatments for unmet medical needs.

In recent history, the blue chip helped develop the first Covid-19 vaccine together with the University of Oxford — which played a crucial role in getting the illness under control and reopening the global economy.

Shell

Formerly Royal Dutch Shell, the company is one of two oil majors on the FTSE 100. With truly global operations, the company is involved in the entire oil supply chain, from initial exploration, through to production, refining, distribution and even marketing. In market terms, this means it works in both upstream and downstream sectors, giving it significant economies of scale.

Shell is also investing heavily in developing clean energy and renewable technology such as wind and solar, in addition to a growing focus on biofuels and natural gas to try to achieve a lower-carbon energy mix.

Of course, it remains exposed to the volatility of oil. It's worth noting that the major is considering leaving London for the US over its perceived undervaluation.

HSBC

One of the FTSE 100’s big four banks — alongside Lloyds, NatWest and Barclays — HSBC (Hong Kong and Shanghai banking Corporation) is one of the largest and most well-known banks in the world. It provides almost any services imaginable to individuals, corporations and institutions.

These include retail banking, wealth management, global banking and markets, commercial banking and private banking. It serves 39 million customers covering 62 countries. The bank’s global reach makes it a key player in the wider industry, though there are concerns over its political balancing act between China and the west.

Unilever

Unilever is a massive consumer goods business which owns brands covering food and beverages, beauty products, cleaning agents, personal care, and home care. It’s well-known as one of the largest consumer goods companies in the world.

The brand portfolio includes Knorr, Lipton, Axe, Dove and Hellmann’s, alongside dozens of other famous makes. While shares in the company have arguably underperformed the market over the past few years, it occupies a spot in many portfolios simply for its defensive power.

Unilever’s recently implemented Sustainable Living Plan is designed to improve its environmental and social impact, including improving recycling rates and the lives of its local suppliers. It is considering spinning off its ice cream brands to create more shareholder value.

BP

The second FTSE 100 oil major, BP is — just like Shell — one of the globe’s largest energy companies, also operating in the exploration, production, refining, distribution, and marketing of oil and gas. And just like Shell, BP is also spending heavily on renewable alternatives as part of a wider commitment to addressing the risks of climate change.

It’s worth noting that despite the relatively elevated oil price, the FTSE 100 company has had to deal with the rapid exit of its former CEO, alongside exiting Russia operations in the wake of the Ukraine war.

GSK

After spinning off consumer healthcare goods business Haleon, GSK now operates solely within a similar space to AstraZeneca, researching and developing the next generation of clinical treatments across a multitude of diseases. These include four main therapeutic areas: infectious diseases, HIV, respiratory/immunology and oncology.

Indeed, GSK is a global leader in developing medicines for HIV having pioneered the first treatments in the 1980s. And the company plans to eventually develop a cure for the illness. Like Unilever, some shareholders have recently argued that the company is underperforming, but its size and status means it can easily be classified as blue chip.

Rio Tinto

Dual-listed on the ASX, Rio Tinto is one of the largest mining companies on the planet. While Rio is involved in almost every metal, its largest exposure is to iron ore; among other brands, it sells the world-famous Pilbara Blend to customers. The company is highly cash generative meaning it is often boasts one of the largest dividends on the FTSE 100.

However, mining is a cyclical industry, and Rio is highly impacted by the prices it can fetch for its commodities. These are tied to global economic growth, and particularly demand in China, which has weakened over the past year. For context, the most recent Export Finance Australia data shows that iron ore accounts for 38% of Australian goods exports and 77% of goods exports to China.

Relx PLC

While every other name on this list is well-known by the general public, Relx PLC is rarely in the spotlight. However, it’s still an important blue chip as a global provider of information-based analytics and decision tools for professional and business customers.

The company operates across various sectors, including within scientific, technical and medical — alongside the legal sector, and risk and business analytics. The company is at the cutting edge of leveraging data and analytics to help its customers grow rapidly, and has a strong economic moat around its operations.

Diageo

Diageo is a multinational alcoholic beverages business, with a massive brand portfolio of premium spirits, wine and beer brands. These include Johnnie Walker, Guinness, Smirnoff, Baileys, Tanqueray, and Captain Morgan, among many others. The company spends heavily on product development in order to respond to changing consumer preferences — for example, within the craft spirits space.

Diageo has started to struggle with changing habits in South America. But the global nature of the business and availability of its products the world over make the FTSE 100 operator a mainstay of the index.

Glencore

Glencore is one of the world's largest global diversified natural resource companies and a major producer and marketer of more than 60 commodities.

Like Rio Tinto, the miner is subject to the commodity supercycle. Happily, it is well known as one of the world's largest producers and marketers of copper. And the metal appears to be on the verge of a bull run, with some investment banks forecasting $12,000 per tonne over the near term.

Glencore's diversified operations among dozens of countries makes it both a popular investing choice, and also a mainstay of the mining industry. In other words, it retains all the hallmarks of a blue chip.