Imagine that you've been hired as general manager of an expansion baseball team in a deserving city such as Las Vegas or Buffalo, N.Y. If you could select any player in the entire league, who would you choose? Would you be looking for obscure utility infielders who walk a lot or the dominant performers in the game -- players such as Alex Rodriguez, Albert Pujols, and Johan Santana?

Ask yourself the same question about stocks. If you are looking to provide ballast for your portfolio by establishing one or two core positions, what would you choose: a risky small cap that just went public or an industry stalwart that has outperformed the market over the past 25 years? Recognizing that everyone needs one or two blue-chip stocks in his or her portfolio, The Motley Fool brings you its first-ever Blue-Chip Report 2005. Our research tells us that the 10 stocks presented in this report should outperform the market over the next decade with below-market levels of risk. As one of the editors of the report and an author of one of the picks, let me explain.

I know one when I see one
Rather than bore you to tears with a textbook definition of the term "blue chip," let's just agree that most of us know a blue-chip stock when we see one. For me, a blue chip sports a high price tag, carries little risk, boasts a distinguished history of successful operations, and usually pays a decent-sized dividend. According to this view, Coca-Cola (NYSE:KO), with a price-to-earnings ratio (P/E) of more than 20, a low beta (a measure of a stock's volatility in relation to the market), a track record dating back to the late 19th century, and a dividend yield of 3%, is clearly a blue chip. A risky, dividend-free, unproven company such as Taser, on the other hand, is not.

Identifying blue-chip stocks is easy enough. The real question is: Can you make money investing in these companies? The financial "experts" would argue that you can't. But Hall of Fame investors Warren Buffett and Peter Lynch have proved that you can. We fall into the latter camp.

A look at some of the top blue chips in America over the past 10 years illustrates the type of returns you can achieve by investing in large, stable companies:

10-Year Returns of Selected Blue Chips

Company Ticker Investment in 1995 Investment in 2005 Total Return
General Electric (NYSE:GE) $10,000 $64,035 540%
AIG (NYSE:AIG) $10,000 $33,403 234%
ExxonMobil (NYSE:XOM) $10,000 $60,978 510%
Citigroup (NYSE:C) $10,000 $98,199 882%
Intel (NASDAQ:INTC) $10,000 $35,920 259%
IBM (NYSE:IBM) $10,000 $35,937 259%
Coca-Cola KO $10,000 $16,165 62%
S&P 500 Index $10,000 $22,249 122%

Six of the seven outperformed the market, and you wouldn't have to channel the ghost of Benjamin Graham to realize that GE might deliver high returns. According to The Economist, GE has consistently outperformed the market for the past 100 years! Recent strength in the energy and financial areas led to big gains for ExxonMobil and Citigroup. Once again, no surprises there. My hunch is that the health-care industry will experience similar strength over the next decade, which is why I chose an iconic health-care giant as my selection in Blue-Chip Report 2005.

How can Fools beat the market?
There are two types of blue chips that we feel will beat the market over the next decade. The first type we look for are stocks that have been beaten down in recent months. At least five of our 10 blue-chip selections are value picks. Motley Fool Income Investor analyst Mathew Emmert chose an outstanding financial company, positioned in a rapidly growing niche, that just happens to be 26% off its 52-week highs. Fool co-founder and Motley Fool Hidden Gems analyst Tom Gardner chose another company trading at a discount -- and he argues that it's the best-managed company in America.

The other blue chips we recommend are on the verge of returning to their high-growth glory days. Wall Street analysts often feel that mature companies should act their age and sit in their rockers while delivering mid-single-digit growth rates for all eternity (not that there's anything wrong with that). But our analysts find a few choice exceptions to this rule.

Seth Jayson analyzes a former highflier that he believes will return to its heyday of meteoric growth. Tim Beyers recommends a company that has been able to reinvent itself more times than Geraldo Rivera. Tim's pick carries a bit more risk than some of the other selections, and you might disagree with whether or not Tim's company is actually a blue chip, but I found his argument compelling. What will you think?

Returning to my own selection, I recommend a company that has outperformed the market over the past 20 years -- and should do so for the next 20 years. Although it has been a household name for more than a century, the company has also been able to deliver double-digit earnings growth every year since the mid-1980s.

A group portrait of the 10
We've chosen 10 of the best companies in the world: Three are among the largest according to market cap; two are leaders according to profitability; seven carry very little risk; six offer growth; five offer value; and all but one pays a dividend! (Any guesses as to which company that is?)

As with baseball's free agents, when it comes to stocks, sometimes you need to pay up for excellence. If the Boss demands another pennant for the New York Yankees, the organization doesn't worry about the cost. They go after the best -- top starting pitchers such as Roger Clemens and Randy Johnson. Critics may say you can't buy a pennant, but tell that to Mr. Steinbrenner and his six World Series rings.

If you're looking for superior stocks that offer the promise of high returns with below-market levels of risk, the Fool's Blue-Chip Report 2005 will provide you with invaluable analysis and insights into the companies you should be considering. Click here for more details.

John Reeves does not own any of the companies mentioned in this article. He also promises that this will be the last time he says anything nice about George Steinbrenner. Coca-Cola is a Motley Fool Inside Value recommendation. Taser is a Motley Fool Rule Breakers recommendation. The Fool has a disclosure policy.