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What do you guys think about Russian stocks. You have entire ETFs trading at single digit PEs and below book value.  You also have megacap companies like Gazprom trading at .3x it's book value.  Obviously there is political risk and corruption, but valuation makes it tempting. 

 

I guess my main concern is that I've been burned badly on cheap companies with shady management (Chinese reverse mergers) and etc before and want to make sure I'm thinking through this correctly before taking capital. 

 

What are your thoughts? 

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What do you guys think about Russian stocks. You have entire ETFs trading at single digit PEs and below book value.  You also have megacap companies like Gazprom trading at .3x it's book value.  Obviously there is political risk and corruption, but valuation makes it tempting. 

 

I guess my main concern is that I've been burned badly on cheap companies with shady management (Chinese reverse mergers) and etc before and want to make sure I'm thinking through this correctly before taking capital. 

 

What are your thoughts?

 

How about the Chinese hybrids that trade at 0.1 PE? :)

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Personally I spend quite some time these days trying to understand the market valuation of certain Russian stocks when time permits, right now with focus on OAO Gazprom. Lukoil and Rosneft will be the next ones, however I'm not sure in which order. I will decide that later based on some overall analysis. My interest in OAO Gazprom is based on gas reserves owned by the company, its moat nationally [Russian monoly as per Russian State decision/regulation] and a so far not for myself documented overall perception that the company is "embracing" Europe with regard to gas supplies.

 

Based on latest financial statements [iFRS] I have calculated current P/E to 5.04 for OAO Gazprom based on currency rates [rates RRU/EUR] about two weeks ago. The stock has been tanking since April 2011, and so far I don't understand why.

 

My interest in the above mentioned three companies is not based on that they are Russian, but on their share metrics vs business performance, their state of affairs and prospects vs market in general.

 

From reading the board I have understood, that Packer is also interested in Gazprom and Lukoil. Perhaps he will chim in.

 

 

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"I think if it’s cheap enough, you can afford more country risk or regulatory risk. It’s not complicated." Charlie Munger, Berkshire Meeting 2004

 

I did a writeup on Lukoil that's in the investment ideas section.

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What do you guys think about Russian stocks. You have entire ETFs trading at single digit PEs and below book value.  You also have megacap companies like Gazprom trading at .3x it's book value.  Obviously there is political risk and corruption, but valuation makes it tempting. 

 

I guess my main concern is that I've been burned badly on cheap companies with shady management (Chinese reverse mergers) and etc before and want to make sure I'm thinking through this correctly before taking capital. 

 

What are your thoughts?

Read a lot. Understand the mentality and consider it's very different from Europe/The US.

 

Investing in Russia is a lot like investing in China. A lot of scams, bad/opaque accounting, government involvement, corruption, and every time the regime changes there's a real risk. In such an environment, big fortunes are made and lost.

 

To invest in such an environment, one needs to know absolutely everything possible about a company and have balls of steel. Good luck to you sir!

 

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