Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Correct into Bitcoin Happy Thanks Halving - Earnings Season Buying Opps - 4th July 24
24 Hours Until Clown Rishi Sunak is Booted Out of Number 10 - UIK General Election 2024 - 4th July 24
Clown Rishi Delivers Tory Election Bloodbath, Labour 400+ Seat Landslide - 1st July 24
Bitcoin Happy Thanks Halving - Crypto's Exist Strategy - 30th June 24
Is a China-Taiwan Conflict Likely? Watch the Region's Stock Market Indexes - 30th June 24
Gold Mining Stocks Record Quarter - 30th June 24
Could Low PCE Inflation Take Gold to the Moon? - 30th June 24
UK General Election 2024 Result Forecast - 26th June 24
AI Stocks Portfolio Accumulate and Distribute - 26th June 24
Gold Stocks Reloading - 26th June 24
Gold Price Completely Unsurprising Reversal and Next Steps - 26th June 24
Inflation – How It Started And Where We Are Now - 26th June 24
Can Stock Market Bad Breadth Be Good? - 26th June 24
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Russia: A Dirt-Cheap Investor Profit Opportunity

Stock-Markets / Russia Apr 11, 2013 - 05:44 PM GMT

By: Investment_U

Stock-Markets

Carl Delfeld writes: Russia is one big country.

With 6.6 million square miles inside its borders, it is the world’s largest sovereign landmass. Giant companies such as Lukoil dominate the Russian economic landscape. The big bosses in Moscow control these behemoths.


Right now, the Kremlin is struggling with political uncertainty, rampant corruption, weak productivity and falling energy prices, all of which have hammered Russian economic growth. The country’s GDP numbers for February showed growth of just 0.1%.

So why in the world would anyone in their right mind invest in Russia right now?

An American entrepreneur and investor who has made a bundle in basket-case countries like Russia and Argentina put it to me this way: “To make money, it doesn’t have to get great, it just needs to get a little bit better.”

This is why dirt-cheap Russia presents us with a great value opportunity.

But Russia is also a good example of the challenges facing investors trying to tap into emerging market opportunities.

Limited Choices

There are a few mutual funds, of course. And there are four Russian companies that trade as ADRs such as Mechel Steel (NYSE: MTL), Mobile TeleSystems (NYSE: MBT), Rostelecom (BE: RTL), and VimpelCom (NYSE: VIP).

There are an additional 37 major Russian companies listed over-the-counter. These “pink sheet” listings are a growing trend for even the largest companies (like Lukoil) that are eager to avoid the high cost and regulatory burdens of the big board. Picking through this list to find the “pink sheet blue chips” takes patience, skill and judgment.

Be careful.

Finally, there are exchange-traded funds (ETFs) that are composed of a basket of Russian stocks. The funds trade just like stocks.

The highest profile is the Van Eck’s Market Vectors Russia ETF (NYSE: RSX). Energy and basic material companies account for 68% of its assets. The fund has $4 billion in assets, and 95% of the companies in the basket have a market value greater than $5 billion.

But while the fund is a decent proxy for Russia’s overall economy, it is very top heavy.

Small Size Has Its Advantages

I suggest you look at many smaller Russian companies that offer the following advantages over the better-known giants:

Private ownership and control

Government ownership and support comes at a high price. Smaller private companies fly under the radar. They also tend to be more nimble and have the opportunity to grow faster. State-owned and controlled companies can hit speed bumps as government regulations and policies change.

Broader and deeper play on turnaround

Even marginal market reforms in Russia have created and will continue to create winners outside of energy and commodities. The tax revenue from higher commodity prices filter back into the domestic economy sort of like a perpetual stimulus program. Smaller companies in a wide array of industries are poised to capture this demand and turn it into profits for shareholders.

Less research coverage equals “discovery” potential

Like small caps all over the world, Russian small caps are largely unknown and are covered by analysts only sporadically. As a test, look at the list of the 10 largest Russian small caps below. If you recognize more than a few, you probably hail from Russia.

While it is difficult to invest in these Russian bear cubs, Van Eck’s Russia Small Cap ETF (NYSE: RSXJ) will get the job done.

The ETF offers good diversification with a 35% weighting in energy and materials, leaving more room for allocations to utilities (18%), industrials (15%), healthcare (8%) and other consumer (18%) sectors.

Below are the ETF’s top-10 holdings:

Try a double-barreled shotgun approach with the two ETFs listed above and take advantage of a market trading at only seven times earnings – a significant discount to the emerging markets index and about half that of the S&P 500.

Good investing,

Carl Delfeld

Source: http://www.investmentu.com/2013/April/russia-a-dirt-cheap-profit-opportunity.html

http://www.investmentu.com

Copyright © 1999 - 2011 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in