Signs point to return of blue chips

NEW YORK – During the Dow Jones industrials’ seven long years of recovery, investors looked elsewhere for faster profits, pumping money into everything from Las Vegas townhouses to Brazilian paper companies to gold.

Now that the Dow has topped the heights of January 2000 and is hitting records nearly every day, while real estate and gold are wilting, analysts say that investors shouldn’t ignore the blue chip stocks that were once the mainstay of their portfolios.

“Investors should not miss the message that larger stocks might be coming back,” wrote Richard Bernstein, Merrill Lynch’s chief investment strategist, in a report Thursday.

The Dow’s fortunes turned in the spring when the winning investments of the previous five years – commodities such as oil and gold, stocks in emerging markets such as India, home building companies and energy stocks – started to decline.

Investors who had been ready to bet everything on climbing zinc prices woke up and realized their investments were no safer than a day at the track. Suddenly, boring looked good.

“Money that a year ago would have been invested in Miami condos and six months ago would have been invested in crude oil futures is now looking for a home,” said John Skjervem, chief investment officer of Northern Trust’s personal financial services business.