Blue chips of the Russian stock market – where to invest in 2024

Blue chips of the Russian stock market as of 2022.
Blue Chipsname the shares of the most stable companies in the country. They are also called first-tier stocks. According to statistics, when investing in them, the least risk of losing investment. It is one thing to own shares in Sberbank, and quite another to the unknown “Let’s Go”, from which the license can be revoked at any time. Blue chips of the Russian market are leaders in the industry, many of them in Russia are controlled by the state. The state is the main shareholder of Gazprom – over 50% of the shares. Dividends are an important line of the budget, so investors have no doubt that in the event of problems, the state will provide financial support. Many of the blue chips are strategic companies in the country. Gazprom is a gas export monopoly. Polyus is a leader in gold mining. The emergence of a worthy competitor is unlikely – a lot of capital is needed to enter this market.

The term “blue chips” comes from poker and is rather arbitrary. There are no clear criteria by which a company is classified as a blue-chip in Russia. But you can highlight the main criteria.

The company must be widely known in the country and have stable profit growth for several years. The stock must be high-cap. The company must have a stable business model, and the state must be interested in the development of the industry.

Benefits of first-tier stocks

What are the advantages of Russian blue chips

Liquidity

The higher the liquidity of a stock, the easier it is to sell existing large-volume assets. Also, the liquidity depends on how close the deal will be to the market price. Russian blue chips have the best liquidity – hundreds of traders trade them every day. So the daily turnover of Sberbank or Gazprom is tens of billions of rubles.

Reliability

An investor with first-tier stocks (Russian blue chips) can be confident in their investments. These companies have strong businesses, higher credit ratings, less debt burden, and more resources. That is why investing in these stocks is advised for beginners.

Dividend

Most of the blue-chip companies in Russia pay dividends. These are sustainable companies that can share some of the profits with shareholders. A large share of the budget of some regions is dividends. State-owned companies in Russia must pay at least half of their profits in the form of dividends.
Blue-chip structure [/ caption] The rest of the stocks with lower trading volumes and unstable indicators are referred to as “Second tier”, “third tier”, etc. The higher the echelon order, the less liquid the share is. Thus, the investor does not experience any difficulties in selling a block of shares in Rosneft for several million rubles. The deal will take place in a few minutes. In third-echelon promotions, problems with the sale of shares (there are simply no buyers) begin as early as 100-200 thousand rubles. Second tier stocks can show high
volatility from 20% per day and above. Blue chips have lower volatility.
Large foreign investors primarily choose the largest and most reliable companies and do not sell them without good reason. Large foreign investors are pension funds, hedge funds, which have a risk model that does not allow investing in stocks with a low credit rating. Therefore, the inflow of foreign investment goes primarily to the most stable Russian companies. Pension and hedge funds are unable to buy second and third tier stocks due to insufficient liquidity and / or low credit ratings. Changes in 2nd tier stock prices are not always fundamental. Basically, the rise or fall is speculative, and the investor cannot be sure that if a stock rose by 20-30% today, it will not fall tomorrow by 50-80% without reason.The growth of quotations is of a long-term nature and is supported by fundamental reasons. These are the stocks that should be considered for long-term investment. TOP-5 dividend shares of the Moscow Exchange in January 2022 – where to invest: https://youtu.be/L73j_Xa_lhA

List of blue chips of the Russian stock market for 2022

Based on the change in the quotes of the largest companies in the country, they draw a conclusion about the economic situation as a whole.
The Moscow Exchange calculates the MOEXBC blue-chip
index . The current list of blue chips is published on the official website of the Moscow Exchange. The MOEXBC index is not available for trading, it is a market indicator.
In Russia, 15 companies belong to the first echelon. It is in these companies that both experienced traders and those who are just starting to understand investments should be the first to invest. With the shares of the largest companies, the investor has the right to a small share of the profit and during the correction in the market it is pleasant to still receive income. Many companies have paid stable dividends for many years, regardless of the market situation. Let’s take a closer look at the blue chips of Russia:

1. Polyus Gold is a leader in the gold mining industry in Russia. In 10 years, shares have risen in price by 1307%, an average annual dividend yield of 4.66%.
2. TCS Group is a financial group of companies, the main asset is Tinkoff Bank. In addition, Tinkoff Insurance and Tinkoff Investments are included . Growth over 3 years 566%, average annual dividend yield 0.91%.
3. Yandex – development of a search engine, in addition Yandex offers taxi services, food delivery, electronic payment system, etc. Growth in 10 years 416%, the company does not pay dividends, preferring to invest in development.
4. Novatek is the leader in gas production in Russia. 10-year growth 375%, average annual dividend yield 2.4%
5. MMC Norilsk Nickel is the largest producer of non-ferrous metals, palladium and nickel. Growth over 10 years 324%, average annual dividend yield 9.09%.
6. Sberbank is the main bank in Russia, it has a branch in almost any city in the country. The main block of shares belongs to the state. 10-year growth 365%, average annual dividend yield 6.43%
7. Lukoil is the largest oil company in Russia. It is engaged in the extraction and processing of oil and gas. Growth over 10 years 332%, average dividend yield 6.3%.
8. Polymetal is the largest producer of precious metals in Russia. Growth over 10 years 319%, average dividend yield 4.29%.
9. Tatneft is the largest oil company. 10-year growth 262%, average dividend yield 8.04%.
10. NLMK is the largest Russian metallurgical company. Growth over 10 years 250%, average dividend yield 10.9%.
11. Rosneft is the largest oil company in the Russian Federation. Growth over 10 years 199%, average dividend yield 3.55%.
12. Magnit is the largest chain of grocery, cosmetics and household goods stores. Growth over 10 years 125%, average dividend yield 5.5%.
13. Gazprom is a gas export monopoly. The main block of shares belongs to the state. Growth over 10 years 114%, average dividend yield 6.66%.
14. MTS is the largest mobile operator. Growth over 10 years 73.4%, average dividend yield 11%.
15. Surgutneftegaz is a joint stock company that unites oil producing enterprises in Russia. Growth over 10 years 47.1%, average dividend yield 1.89%.

Blue chips of the Russian stock market – where to invest: https://youtu.be/emCE4DldKW8

Investments in blue chips of Russian companies

Profit from investments in blue chips in Russia consists of annual dividends, and some companies pay dividends and more often – once a quarter and depending on the growth of market value. Multiple growth of quotations is a long process, it can take years. But stable dividends provide cash flow even if quotations fall. Companies will not pay dividends only in the event of a severe crisis affecting the country as a whole.

In the wake of the coronavirus shock, many companies have announced dividend cuts, and some have been forced not to pay them in 2020.

It is most profitable to buy blue chip stocks during panic sales. After the economic situation improves, blue chips are growing faster than second-tier stocks. And the drop in quotations is not so significant. The amount of dividends is a constant value approved by the board of shareholders. It depends on the company’s profit, not on the share price. With a fall in quotations, the dividend yield rises, which slows down a further decline. On a rebound, an investor can earn 20-30% of the portfolio in a short period of time or leave profitably bought shares counting for further growth. Depending on the investor’s capital, there are several strategies for investing in blue chips of the Russian Federation:

1. ETFs can be purchased , such as the DIVD ETF, which includes the most stable dividend paying companies. This method is suitable for investors with small capital, less than 50 thousand rubles. ETF on MICEX [/ caption]
2. Build a blue-chip portfolio yourself . In this case, it is necessary to purchase 15 shares in equal shares. Based on the value of the most expensive share of MMC Norilsk Nickel, the minimum investment amount is 350,000 rubles. If you do not include Norilsk Nickel and buy only the remaining 14 shares, the minimum amount is reduced to 85 thousand rubles. You can purchase the entire portfolio at the same time or buy additional shares from the list evenly once a month or once a quarter.
3. An investor may not buy a portfolio of shares, but invest in a specific share or several shares . For example, some people who worked for Tatneft and who saw the business from the inside, have been buying shares every month for many years.

TATN [/ caption] Sale of shares had a tangible increase in pension. This approach is more risky – if the company does not meet expectations and leaves the market, you can lose investments. For example, this happened with the shareholders of Yukos. With a diversified portfolio, the loss is not critical for capital and can be offset by other profitable positions. When investing in 1-2 shares, the investor loses everything. But the profit is higher if the forecast turns out to be correct.