YOU MAY NOT WANT TO PULL 'BLUE CHIPS' OFF THE TABLE (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

For some time now, technology stocks have grabbed all the headlines, and they have remained the focus of investors, even though their performance has been wildly unpredictable, as evidenced by the stunning volatility of the technology-laden Nasdaq Composite Index this year.

The rush to technology has drawn some investors away from the traditional blue chip stocks the older, established firms that manufacture actual products. This movement helped contribute to an early-year slump in the Dow Jones industrial average, home to many blue chips.

However, going back a little further, we see that the Dow gained more than 25 percent in 1999. True, that was a far cry from the stratospheric 85 percent gain turned in by the Nasdaq for that year, but it's still an impressive figure, and it followed several other years of double-digit gains.

In short, people who took a long-term perspective could see the blue chips were still worthy of attention. This fact became even more apparent when, in little more than a week in March, the Dow gained more than 1,000 points. Why? Part of the answer may be the blue chips were suddenly seen as more affordable than the high-flying technology stocks.

Despite the 34 percent correction in the Nasdaq earlier this year, many of these stocks, especially the "dot.com" companies, are trading at extremely high price-to-earnings (P/E) ratios. That simply means that investors are paying a high premium for the potential earning power of these companies, some of which have yet to show a profit.

Some market experts have suggested the P/E, along with other traditional valuation measures, should be overlooked when it comes to evaluating the new, high-tech stocks., but other market watchers think companies with absolutely no history of earnings are, at the least, pretty risky.

Who is right? It's probably too early to say. In all likelihood, there will be some shakeouts in the high-tech world, particularly in the dot.com sector. But no matter what happens in the technology area, blue chip stocks will still have an important place in a well-diversified portfolio. That's because blue chips have at least three major advantages:

They make money. A company that knows how to earn money in various economic climates should be of some interest to investors.

They pay dividends. Stocks that pay dividends demonstrate that company's commitment to its shareholders. If you don't need the dividends as income, you can reinvest them back into the stock.

They have a track record. Because blue chip companies generally have long track records, you can evaluate how they've performed in a variety of market cycles. This can be useful when you're considering different investment options.

In the final analysis, there is no one "right" category of stocks to own. In making your choices, you will want to consider your needs, your objectives and your tolerance for risk. Ultimately, you may find that you have room for the exciting technologies of tomorrow and the solid blue chips of today.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.