Why invest in Russian blue chip stocks

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Russian Blue Chips is a list of the largest and most famous companies that are popular among investors due to their stability.

They are called so because in poker the blue chips have the highest denomination. A few of these chips can be worth more than a handful of red or green ones. It is the same with investments: in the long run, it is more profitable to have a few reliable assets than many unpredictable ones.

We will explain which stocks are blue chips and why it is important to invest in them, and then we will look at each of them in more detail and show how profitable they can be.

What are blue chips

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These are reliable shares of the largest companies on the Russian stock market, which show stability and growth in the long term.

They are also called the “first tier”: they set trends and are considered indicators of the entire market. According to their condition, they judge the current state of the economy and predict changes.

Second-tier securities are also large companies, but with less stability. They can change the price depending on the value of the blue chips.

There are no strict criteria by which the list of blue chips is determined. But there is a common characteristic:

• The companies are well known in the stock market and beyond.

• They have been trading on the stock market for a long time.

• They are highly liquid and low volatile, thus they are in demand among investors, but they do not fall or grow much in price (volatility – price volatility, liquidity – the level of supply and demand for shares).

• High capitalization (capitalization is the price of the entire company in the market).

Why are blue chips good?

Chips are rising because of the company’s fundamental business processes, not because of speculation. They invest money in them because their business is successful: net profit, revenue and dividendsand debts are falling.

Investing in blue chips is one of the safest. Company reserves help to survive crises and quickly adapt to market changes.

They are liquid. This means that there are always those in the market who want to buy or sell these shares, and at a bargain price.

They pay dividends. Almost all such companies distribute part of the profits among shareholders. To receive the dividends that Russia’s blue chips pay, you just need to own their shares.

Who is eligible for Russian blue chips

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Chip prices usually do not rise sharply, but do so over a longer period. Therefore, they are suitable for those who invest for the long term and want to consistently receive dividend payments, while not seeking to maximize profits in the stock market in the short term.

List of blue chips in the Russian stock market

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Since chips serve as market indicators, exchanges make indexes out of them. An index is a basket with a certain set of securities. Some stocks in the index are getting cheaper, others are getting more expensive, but in general, an average graph is obtained. It shows the general position of companies in the stock market and partly tells what is happening with the economy or some of its directions.

For example, in the USA there is the NASDAQ-100 index – it is calculated on the basis of 100 quotes of American high-tech corporations and shows the state of this industry.

Moscow Exchange settles on the basis of blue chips MOEXBC index. It includes 15 companies. By industry, they were distributed as follows: 6 – energy, 4 – raw materials industry, 2 – finance, 1 – IT technologies, 1 – telecommunications, 1 – consumer goods and services. Let’s talk about each of them in more detail.

1. Polyus Gold

• Growth over 10 years: 1,307%
• Average dividend yield: 4.66%

Polyus Gold is the leader in Russian gold mining and one of the most efficient companies in terms of gold production costs. Extracts precious metals in the Krasnoyarsk Territory, the Irkutsk Region, Yakutia and the Magadan Region.

The company’s largest operating mine is Olimpiada, where about 1.2 million ounces of gold are mined each year. The major fields under development are Sukhoi Log, which contains 40 million ounces of proven gold reserves, and Chertovo Koryto, 3.1 million ounces.

2.TCS Group

• Growth in 3 years: 566.6%
• Average dividend yield: 0.91%

TCS Group is a holding of financial products, where the main asset is Tinkoff Bank. Main activity: banking, investment and insurance services for private and corporate persons. Tinkoff is one of the three largest banks in the Russian Federation in terms of customer base.

The main difference from traditional banks is the absence of physical branches. All TCS Group clients make financial transactions through a mobile application or personal account.

3. Yandex

• Growth over 10 years: 416.2%
• Average dividend yield: pays no dividend

The main development of the company is the Yandex search engine. It is the fourth in the world in terms of processed search queries and the most popular site in the Russian Federation. The search engine is integrated with dozens of related services in the field of finance, transport, retail and logistics. The company is registered in the Netherlands, but is headquartered in Moscow.

Yandex became the leader of the Russian media market in 2012, when it overtook Channel One in terms of audience size, and in 2013 in terms of revenue.

4. NOVATEK

• Growth over 10 years: 375.9%
• Average dividend yield: 2.4%

NOVATEK is a gas company and one of the main producers of natural gas in the Russian Federation. It explores, produces, processes and sells natural gas and liquid carbon. The main place of production is the Yamalo-Nenets Autonomous Okrug.

It ranks third in the world in terms of gas reserves and seventh in terms of production among other public companies. The founder and chairman of the board is Leonid Mikhelson.

5. Norilsk Nickel

• Growth over 10 years: 374.2%
• Average dividend yield: 9.09%

Norilsk Nickel is the largest miner of precious and non-ferrous metals in our country, and palladium and refined nickel in the world. Sells products in 37 countries. Mining and processing complexes operate in Taimyr, the Kola Peninsula, the Trans-Baikal Territory, Finland, South Africa and Australia.

6. Sberbank

• Growth over 10 years: 365.5%
• Average dividend yield: 6.43%

The largest bank in Russia, Central and Eastern Europe, 50% owned by the Central Bank of the Russian Federation. According to Brand Finance, in 2020 the Sber Bank brand was the most expensive in Russia.

As part of its IT transformation strategy, the company is increasing the share of non-banking services: the Sber Logistics logistics service, Sber Market product delivery, the Beru! marketplace, and the DocDoc medical products marketplace.

7. Lukoil

• Growth over 10 years: 332.8%
• Average dividend yield: 6.32%

One of the largest Russian oil companies. It explores and produces oil and gas in 12 countries, and processes it at plants in Russia, Bulgaria, Italy and Romania. Gas stations and other distribution networks of Lukoil operate in 18 countries. It accounts for about 2% of world oil production.

8. Polymetal

• Growth over 10 years: 319.5%
• Average dividend yield: 4.29%

Polymetal is another precious metals miner on this list. Conducts work on ten deposits of gold and silver. The geography of assets is the Russian Federation and Kazakhstan. Second in terms of gold production after Polyus. The number of employees is about 12 thousand people.

9. Tatneft

• Stock growth over 10 years: 262.5%
• Average dividend yield: 8.04%

Tatneft produces oil at 77 fields. Main production regions: Tatarstan, Republic of Kalmykia, Orenburg, Samara, Ulyanovsk regions and the Nenets Autonomous Okrug. The company sells petroleum products through its retail network of gas stations, which has 713 outlets.

10. NLMK

• Stock growth over 10 years: 250%
• Average dividend yield: 10.93%

Novolipetsk Iron and Steel Works is one of the largest metallurgical enterprises in the Russian Federation, which occupies a share of 21% of the total Russian steel production. It produces pipes, fittings, flat products, long products, nails, screws and wire.

11. Rosneft

• Growth over 10 years: 199.4%
• Average dividend yield: 3.55%

Rosneft is one of the main oil companies in Russia. It searches for and extracts oil, refines it, and then sells oil products through its network of gas stations.

Works in 25 countries and 78 regions of the Russian Federation. Its share of oil production is 41% of the total share in the domestic market and 6% of world production. The company has 13 oil refineries in Russia.

Geography of exploration and production: Western and Eastern Siberia, the Urals, the Far East, the Komi Republic, sea trails, Latin America and Southeast Asia.

12. Magnet

• Growth over 10 years: 125.6%
• Average dividend yield: 5.52%

A network of grocery stores, hypermarkets, cosmetic stores and pharmacies. The leader in terms of the number of retail outlets in Russia is about 22 thousand stores in total, which are visited by 13 million people every day.

Magnit is a company with a developed logistics infrastructure: it has 39 distribution centers, and delivers products to its fleet of 4,400 vehicles.

13. Gazprom

• Growth over 10 years: 114.36%
• Average dividend yield: 6.66%

Energy company, 50% state-owned. It explores, produces, stores, processes, transports and sells oil and gas. Produces and sells electricity and heat. It has the largest proven gas reserves in the world (16% of total reserves). The share of Gazprom in gas production in Russia is 68%, in the world – 12%.

14. MTS

• Growth over 10 years: 73.4%
• Average dividend yield: 11.37%

A telecommunications company operating in the Russian Federation and the CIS countries as a provider of satellite and cable television, Internet and a mobile operator. In Russia, Armenia and Belarus, MTS services are used by 86.8 million customers.

The company has the largest network of salons in the Russian Federation – about 5,800 points that sell mobile phones, financial and banking services. MTS also owns two major ticketing operators, Ponominalu.ru and Ticketland.ru.

15. Surgutneftegaz

• Growth over 10 years: 47.1%
• Average dividend yield: 1.89%

Joint-stock company with 7 oil-producing enterprises in the composition. Produces oil and natural gas in the Komi Republic, Eastern and Western Siberia.

Owns the Kirishi Oil Refinery in the Leningrad Region, the largest complex for deep oil refining in Europe. It produces jet fuel, diesel fuel, paraffin, motor fuel, roofing and waterproofing materials.

How to invest in Russian blue chips

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Earnings are made up of two types of income: price growth and dividends. The price of such shares usually rises slowly but steadily. And dividends are paid consistently.

How to buy blue chip stocks:

• Open a brokerage account. An invoice can be issued remotely – sign the documents with an electronic signature or wait for the courier. To open an account, you need a passport.

• After opening an account, the broker will provide you with access to your personal account, where you can buy or sell securities.

• To buy shares, replenish your brokerage account with a card, select the assets you need, the number of securities and make a purchase.

Investment is easy!

Trade securities online with Tinkoff Investments, the largest broker in Russia by number of clients. Open a brokerage account in 5 minutes, log into your personal account from your smartphone or computer and select the assets you need to purchase. Account maintenance – from 0 rubles per month, and commission – only for transactions.

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Read: Why buy shares

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