Totalling up the stock price gainers for the third quarter, we were struck by the mix of high quality and not-so-high quality companies rewarded by investors. When, we wondered, will investors become more discriminating about the sector and, more importantly, when will stocks start sorting themselves out into tiers?

The answer to the first question is "probably never," as there will always be investors who buy on hype or shun the effort to acquire knowledge that would result in informed investments. It's also much easier for a stock to double in price from $2.50 to $5 than from $10 to $20. The illiquidity of biotech stocks also means one substantial investor moving in or out of a position can cause massive swings in price.

But the more fundamental issue is tiering. A handful of companies boast market capitalizations of $800 million-plus, while everyone else has been squashed down under $300 million.

While there's always talk of stratification, if anything stocks probably have "un-tiered" over the past year. Product failures dragged down some early front-runners, while the market pushed down all stocks indiscriminately in the wake of those failures and in reaction to the talk of health care reform.

Too early

To those market reactions, we