To Invest or Not to Invest?
Let me start by saying that I am not a stock expert, I invest personally, but have no professional training in stock advice or markets, this is just my attempt to make sense of all the news that is out there on whether or not to invest in Russia.
Of course there are many reasons to be wary of Russia right now – conflict in Ukraine, uncertainty regarding relations with the EU and US, economic sanctions against big players and the threat of further sanctions – but it is also an interesting time to watch the market. I am also sure if you asked someone who invested in Russia in the last three years, they would tell you all about their losses, rather than their pitiful gains, but hear me out…
Russia has been trying to fight the timidity of investors for years. International investor’s lack of trust has been well documented and accounted for, which is one of the reasons the Government sought to have the St. Petersburg International Economic Forum. But aside from the local push to attract investors, there are numbers on the side of investors as well. Russian companies are chronically undervalued, typically trading at half of their book asset net value. Martin Graham, chairman of London-based Oracle Capital Group and former header of the London Stock Exchange’s AIM international market, has said “In terms of earnings, Russian stocks are traded up to four times cheaper than other emerging markets, while providing the shareholders with four percent dividend yield, among the highest globally.”
All this said, investing in Russia is still high-risk, so what is an investor to do? JP Morgan analyst Alex Kantarovich suggests focusing on export driver stocks. There are many Russian companies that, because of their economic support in terms of exports, benefit from a weaker ruble and are not yet, if ever, the target of sanctions. This suggested “protective basket” of stocks includes big names like Lukoil and Tatneft energy companies, Norilsk and Rusal Bratsk from the mining sector and Gasprom, Rosneft and VTB Bank. To give fuel to the fire Gazprom has recently gained 0.8% and Norilsk Nickel just rose 1.8%, the highest it’s been since September 2011.
So, while this isn’t necessarily a case to invest in Russia, I do think that now is a good time to look in that direction. If you have some spare cash to invest and aren’t too risk-adverse, this could be the rollercoaster you’re looking for!