Blue chips and tiers: how the groups of stocks differ

Stocks are sorted into tiers not by the "quality of the business" but by liquidity — by how many shares you can buy and sell without moving the price against yourself. Blue chips are the top tier: the order book always holds bids and offers on both sides, the spread is narrow, and a trade goes through at almost exactly the price you saw on the screen. The lower the tier, the thinner the order book: an order of the same size eats through several price levels, and the gap between the expected and the actual price becomes a cost item in its own right. Everything else — transparent reporting, analyst coverage, the frequency of dividends, resistance to manipulation — is a consequence of that same property, not an independent feature.

A tier is market jargon, a listing is a formal procedure

An important caveat to begin with: there is no official register of tiers. The exchange maintains listing levels — the first, the second and the unlisted segment — and the criteria there are formal: how long the issuer has existed, disclosure to the required standards, the share of stock in free float, corporate governance. A "tier", by contrast, is an informal classification used by market participants, and its boundaries shift: a stock may formally sit in the first listing level yet trade with the liquidity of the second tier if the bulk of the shares is locked up with the state or with a controlling owner. That is why you should check where a stock belongs not by the lists but by the order book and by the average turnover of that particular stock — both are visible on the Russian stocks page. The term itself is defined separately: see blue chips and the glossary entry.

What exactly you pay for low liquidity

The spread is not an abstraction but an immediate loss at the moment of entry. Buy at the ask and sell straight away at the bid, and you lock in a loss the size of the spread; in blue chips it is barely noticeable, while in the third tier it can be comparable to the price move you expect over months. The second cost is slippage: a market order in a thin order book is filled at an average price worse than the best quote. The third, and the most underestimated, is the cost of exit. Getting into an illiquid stock is easy almost any time; you need to get out precisely when everyone else wants to do the same, and at that point there are no buyers on the other side at all.

A practical rule follows from this: in the lower tiers a limit order stops being a convenience and becomes mandatory, and it makes sense to size a position not against your portfolio but against the stock's average daily turnover. A position that cannot be sold off within a reasonable number of trading sessions is no longer an investment in a share but a stake in a private business with an exchange price tag.

Transparency and how the valuation is calculated

Blue chips are covered by analysts, publish their reports regularly and to a clear standard, and hold calls with investors. The multiple of such a stock rests on fresh and comparable data — for example 3,77 for {{instrument:SBER}} or 45,75 for {{instrument:LKOH}}. In the lower tiers the same metric is often calculated from outdated or incomplete reports, and sometimes it is simply missing: the issuer makes use of its right to reduced disclosure. Comparing the valuation of a third-tier stock head-on with that of a blue chip is therefore wrong — you are comparing a measured value with an estimated one. What exactly a particular issuer discloses, and when, can be found in the reporting calendar and in the corporate events calendar.

Dividends behave differently

Blue chips usually have a formal dividend policy tied to profit or free cash flow, the payouts are predictable, and the dividend yield of {{instrument:GAZP}} and comparable stocks is priced in ahead of time. In the lower tiers a payout is more often an isolated event and depends on the controlling shareholder's need for cash; a cancelled decision or a postponement is an ordinary occurrence. It is convenient to check against dividends and the nearest dates: {{dividend_calendar|limit=5}}.

Where the lower tiers are most vulnerable

A thin order book is the technical precondition for a pump. In an illiquid stock a small amount of money can move the price noticeably, and the move is then sold as "news" in chat groups and mailing lists. The signs repeat themselves: a sharp rise on volumes many times the usual level while the issuer stays completely silent; the absence of any corporate event that would explain the re-rating; orders placed to create the appearance of demand. Setting the move against the news feed and the events calendar answers the question of whether there is a fact behind the rise.

What the division into tiers does not tell you

It says nothing about the quality of the business: there are profitable companies in the lower tiers, and a blue chip can destroy value for years. It says nothing about the fair price: liquidity affects the cost of entry and exit, not the size of future cash flows. And it is no substitute for diversification — the blue chips of the Russian market are concentrated in the commodity and financial sectors, which means a "blue chips only" portfolio remains a bet on a narrow set of factors. This concentration can be partly relieved by funds and by the bond part of the portfolio, starting with OFZ and the broader bond market.

The order of checks before buying

Step 1 — look at the stock's average turnover and spread, not at its listing level. Step 2 — set the position you are planning against that turnover and estimate how many sessions it would take you to exit if interest fades. Step 3 — check which reports the multiples are calculated from and when they were published. Step 4 — find the corporate event that explains the current re-rating, and if there is none, treat the move as unexplained rather than promising. Step 5 — set the limit price in advance, before you open the order.

This article contains no data on how particular groups of stocks have historically performed in terms of total return: such a calculation requires long time series and caveats about surviving and delisted stocks, and it is more honest to say so plainly than to quote a convenient figure.