NEW YORK (MONEY Magazine) - There aren't a lot of companies you can count on these days. Many we once depended on for their sensible management practices and reliable earnings streams have strayed, putting the risk/reward relationship out of whack.

However, there remains an elite group that still deserve the crown of blue chip, and we review them here: Click on any company name to go straight to our analysis: Microsoft, Wal-Mart, Philip Morris, Coca-Cola and Johnson & Johnson.

Also in this series Where have all the blue chips gone? Not Blue: Intel, Home Depot, more

Microsoft, the world's preeminent, and perhaps the most profitable, company, has been a great growth stock since it went public in 1986. But a blue chip? Ironically, its slowing revenue growth over the past few years has made it more attractive as a stable play.

Even if Microsoft (MSFT: Research, Estimates) is tied to the fortunes of the slumping PC industry (some 90 percent of all computers run its Windows software), its $40 billion cash hoard and 48 percent operating profit margins provide enough ballast and ammunition for it to outlast competitors in old and new markets.

More picks and strategies -- click here

Its installed base of users ensures that Microsoft does great repeat business. And thanks to its loyal following, its new software products like Windows .NET gain an instant market presence. Plus the company has the wherewithal and patience to develop many non-PC businesses, such as video games with Xbox, server software with Windows NT, or an Internet portal business with MSN.

With its shares trading at less than half their all-time high of $120, investors have already discounted for the company's slowing growth rate, any lingering antitrust problems and the uncertain outlook for corporate information-technology spending.

While the stock's beta of 1.23 (the market's beta is 1.0; the higher the beta the greater the volatility) would cause some to pause, the relative volatility has more to do with the company's transition from a growth stock to an established franchise. Now if we could only convince Bill Gates to pay a dividend, Microsoft's stock would be the blue chip to own. -- back to top

Wal-Mart Stores has been so successful for so long that its biggest risk is meeting the expectations its track record engenders. Based on the stock price, earnings multiple and prospects of the largest retailer in the world, that won't be a problem for the foreseeable future.

This year, with a staggering $232 billion in sales, Wal-Mart was the world's biggest revenue generator. But what really sets Wal-Mart apart is that it grows by using its 800-pound-gorilla status to bully suppliers into efficiencies that lead to better prices for its customers.

It also uses its girth to expand into every area of retail; it's the nation's largest grocer, as well as the top seller of jeans, toothpaste, toys, music and DVDs, to name a few. Aside from its 1,100 traditional discount stores, Wal-Mart is found in many forms, such as its humongous supercenters, smaller neighborhood markets and members-only Sam's Clubs.

Even though Wal-Mart looks as if it's at a saturation point -- it has nearly 4,000 stores worldwide, including 19 under a joint venture in China -- its prospects for continued growth are promising. In September, the company announced aggressive expansion plans for 2003. International operations are becoming very profitable. Perhaps most important, same-store sales continue to show strong growth, while nearly all its peers grow weaker and weaker.

While Wal-Mart (WMT: Research, Estimates) has more than $24 billion in debt, it generates so much cash that it has no trouble meeting its obligations. It has also consistently paid a small dividend (its yield is 0.6 percent) that has risen each year for the past decade. Its beta is 1.14. And, the company's financials are so straightforward that investors have complete trust in its numbers. -- back to top

The biggest cloud on Big Mo's horizon is not tobacco litigation; it's the company's plan to change its name to Altria Group. Altria sounds like a disease caused by too much smoking. And even with the name change, those crafty tobacco lawyers will still be able to find them.

Otherwise, things look good for Phi -- er, Altria. Tobacco is legal and phenomenally profitable, and its customers are addicted (MO has 51 percent of the U.S. market). Tobacco accounts for 61 percent of operating profits; packaged-food brands like Kraft, Post, Kool-Aid and Oscar Mayer make up the rest.

After merging its Miller Brewing subsidiary with a South African brewer, Philip Morris owns 36 percent of the world's No. 2 brewer. Overall, 13 brands each garner more than $1 billion in sales; 92 bring in over $100 million. And altogether they made up $84 billion in total revenue (on which the company got 22 percent operating margins) over the past year.

Excluding the litigation threat, this is the most stable and diversified business imaginable. As long as people smoke, drink beer and eat cheese, these guys will mint money. At $38, Philip Morris' shares trade at less than 8 times 2003's expected profit and yield a whopping 6.8 percent (the dividend has doubled since 1994). The stock's beta of 0.39 means that it's an ideal counterweight to a volatile market.

As for the litigation risk, there is little to fear, as it is already priced into the stock. Witness the modest share price fluctuations after legal developments.

Plus the smart money is betting that the government will make sure the company will be around for years to come, if for nothing else but to pay off its tobacco settlement. At current prices, the stock provides investors an opportunity to pick up a blue chip, whatever it calls itself. --back to top

Coca-Cola has been considered a blue chip for decades -- even Ty Cobb got rich buying and holding Coke. In the 1970s, Coke was the world's most recognizable brand name.

Since then, it has carved up the soft-drink world with No. 2 Pepsi, saturated its market, stumbled over new product launches, bought and sold a movie studio, recognized fortunes to be made through international expansion, traded at ridiculous growth multiples, survived the death of a legendary CEO and the short tenure of his successor, and suffered an international health scare.

Coca-Cola (KO: Research, Estimates) still has some growth prospects, as soft-drink consumption is still rising. It has been successfully raising prices and increasing shipments, and is expecting greater earnings. And it's not just a cola company. Coke is a leading player in the bottled-water business with its Dasani brand, plus it has a sizable fruit-juice business known as Minute Maid. Some argue that Coke may be the most focused and efficient company in the world.

More important, Coke is a very safe company. It has raised its dividend every year for more than a decade. Only twice during that time has it had to use more than half its reported earnings to pay the dividend (current yield: 1.7 percent). As of September it had $2.8 billion in long-term debt and approximately the same amount of cash on its balance sheet.

Better still, the air has been let out of Coca-Cola's growth story, so it trades at half the P/E it fetched in 1998. And because the stock has already fallen from the $73 to $89 range achieved in 1997-98, it has been very stable during the past year of market volatility, with a beta of only 0.58. -- back to top

Johnson & Johnson has been a rarity during the bear market: a strong large-cap company that has continued to deliver positive results, for which the market has rewarded it. J&J owes this preferred position partly to the fact that the market passed it by when looking for flashy drug plays in the late 1990s. (In 2001, it got about two-thirds of its $7.9 billion in operating profits from drugs and the rest from medical devices and consumer products.)

The company hasn't had the big patent-expiration problems of competitors or the difficulties of digesting big acquisitions, which it avoids. It has a beta half the market's -- 0.52 -- and a dividend yield of 1.4 percent. Earnings, cash flow, revenue and dividends have all risen every year for over a decade. The stock has been a safe haven, actually rising in 2001 and 2002.

If J&J has a problem, it is that the stock has become revered during the bear market, and it may have become overvalued (its P/E based on 2002 expected profits is 30 percent above the market average). A recent UBS Warburg research report wondered if holding J&J stock "may be the equivalent of owning shares of GE two years ago in the $60s." But Johnson & Johnson is not GE.

The premium accorded GE in the Welch era was far greater, and the expectations placed on GE more unrealistic. GE also fell because, in the post-Enron era, any corporation that relies on acquisitions and cutting-edge financial reporting is automatically suspect. Johnson & Johnson won't have that trouble. In fact, when the other pharmaceutical companies get past their troubles, the whole sector should rise, helping J&J. -- back to top