Why are Russian stocks so cheap?

[EliG]

The political economy of Russian oil and gas

http://www.aei.org/outlook/foreign-and-defense-policy/regional/europe/the-political-economy-of-russian-oil-and-gas

 

That was a very good read. Russian petro-economy is a mess.

 

[randomep]

The political economy of Russian oil and gas

http://www.aei.org/outlook/foreign-and-defense-policy/regional/europe/the-political-economy-of-russian-oil-and-gas

 

That was a very good read. Russian petro-economy is a mess.

 

+1

 

makes me think putin just wants to preserve power, not world conquest, he isn't hitler.......

[constructive]

The political economy of Russian oil and gas

http://www.aei.org/outlook/foreign-and-defense-policy/regional/europe/the-political-economy-of-russian-oil-and-gas

 

That was a very good read. Russian petro-economy is a mess.

 

Thanks for the link. The negative comments on Gazprom were well stated. I'm a little disappointed they didn't also provide a view on Lukoil.

 

I wonder how much of the disconnect between US and Europe gas prices can be attributed to our more speculative market for junior resource companies (US companies being willing to pursue projects with lower rates of return), versus physical constraints.

[Viking]

Looks like we may have seen the lows for Russian stocks for this crisis. Looks like Putin is happy to take Crimea and call it a day; big strategic win for Russia. As others have mentioned previously, RSX is a pretty easy way to get exposure (thanks for doing most of the leg work) and it is still very cheap.

 

Future looks pretty bleak for Ukraine. Perhaps things go sideways until presidential elections are held and we see who gets in and what their plan is. Russia likely is happy with an economically messed up Ukraine as it makes them very dependent on Russia.

 

Putin must really like capitalism; very easy to game the system and make some serious money. (Sell high and then buy low.)

[Lance]

Hi Viking - hopefully Putin is done, but keep in mind that Hitler took over the Rhineland, Austria, Czechoslovakia and Poland over a number of years, not weeks or months.  If Crimea is his Rhineland, he might move on Ukraine a year from now. 

 

That being said, I've added to Gazprom and Lukoil lately.

 

Thanks,

Lance

[Viking]

Lance, I do not agree with the comparison between Putin and Hitler. To me Russia of 2014 does not look like Germany of 1936. Russia is weak and must be very careful. Having said that, it would not surprise me to see Putin carve off parts of Eastern Ukraine should he be given the opportunity. Should Ukraine enter a bloody civil war then perhaps the Russians will be given their opportunity. My read is Putin has acted very rationally (from the Russian perspective). However, if they want more of the Ukraine the 'costs' will increase dramatically and I think he is too pragmatic to take that risk on; the Russian economy is too linked to the rest of the work for Putin to get too greedy.

 

Yes, there are significant risks that the situation could devolve. However, I now think the better odds are that the situation muddles along with Russian stocks moving up 15 or 20% over the next few months. Reading the tea leaves today, I like the risk / reward.

[Lance]

Viking, I agree.  I don't see Putin doing much, but was just saying that this thing would probably play out over years, not months.  I like the risk/reward here as well.  I wish I had bought one of the etfs and not just the two oil equities during the big sell off.

 

Thanks,

Lance

[Phaceliacapital]

http://blogs.barrons.com/emergingmarketsdaily/2014/03/14/deutsche-why-russia-should-be-a-frontier-market/

 

Smith argues Russia deserves a frontier market status, or a class of its own, not because of geopolitical risk. Rather, Russia faces a broad-based corporate governance issue: Enterprises forgo corporate profits at the bidding of the politicians.

[vinod1]

Rather, Russia faces a broad-based corporate governance issue: Enterprises forgo corporate profits at the bidding of the politicians.

 

This is pretty much the norm in every emerging market country. Petrobras in Brazil, ONGC & SBI in India to name just a few for example.

 

Article is BS.

 

Vinod

[Phaceliacapital]

He makes the case that it isn't the same:

 

http://ftalphaville.ft.com/2014/04/01/1817912/hello-alphaville-this-is-rock-n-roll/

 

http://ftalphaville.ft.com/files/2014/04/Deutsche-on-state-controlled-1-272x421.png

[vinod1]

He makes the case that it isn't the same:

 

http://ftalphaville.ft.com/2014/04/01/1817912/hello-alphaville-this-is-rock-n-roll/

 

http://ftalphaville.ft.com/files/2014/04/Deutsche-on-state-controlled-1-272x421.png

 

You are not going to get Buffett style corporate governance in Russia or in any of the emerging markets. It is going to be a continuum but at 4-5 times PE, even if you assume 30% of earnings are going to be stolen or misdirected into unprofitable ventures you have a decent margin of safety.

 

Vinod

[jouni1]

has anyone looked at X5 retail holdings? second largest retailer in russia, saw some finnish russian value funds had picked this up. owned 47,86% by alfa group, listed in london.

[fareastwarriors]

 

 

 

As Russia Stumbles, Gazprom Comes Up $910 Billion Short

 

 

 

http://www.bloomberg.com/news/2014-04-03/gazprom-s-910-billion-gaffe-shows-putin-economy-waning.html

[TwoCitiesCapital]

I've been thinking about Russia's chronic P/E problem and have begun to wonder if it really matters as long as the stocks maintain high dividends.

 

You have the opportunity to buy a stock that trades at 100 and pays a dividend of 10. Assuming no growth we can consider two scenarios over a 15 year holding period.

1) the stock doubles and dividend proceeds are reinvested

2) the stock remains at the same price and proceeds are reinvested.

 

Does it surprise you that investors actually stand to make more in scenario two? I guess my point is that the ability to reinvest at chronically depressed prices is a boon for investors over the long term. Obviously you could make the argument that once it doubles you could sell and invest in something else that subsequently doubles, but there's no guarantee those opportunities will be around or revalue quickly.

 

I don't think chronic discounts are a bad thing. Rather, you can invest in them and reinvest the dividends in the chronically undervalued security when you have difficulty finding better opportunities and then reinvest the dividends in other companies once you think you've found a quality double. These are simply a vehicle that allow you to compound the free cash flow coming into your portfolio each quarter rather than compounding capital gains. You wouldn't ever need to hold much cash if you knew you could reliably have a portfolio that would yield 10% in cash each year.

 

Am I wrong to think this way? It almost seems like the same reason Gio likes Lancashire. It replenishes his cash.

 

 

[stylized_fact]

Here is an interesting interview with Prosperity Capital's Mattias Westman

 

[JBird]

I've been thinking about Russia's chronic P/E problem and have begun to wonder if it really matters as long as the stocks maintain high dividends.

 

You have the opportunity to buy a stock that trades at 100 and pays a dividend of 10. Assuming no growth we can consider two scenarios over a 15 year holding period.

1) the stock doubles and dividend proceeds are reinvested

2) the stock remains at the same price and proceeds are reinvested.

 

Does it surprise you that investors actually stand to make more in scenario two? I guess my point is that the ability to reinvest at chronically depressed prices is a boon for investors over the long term. Obviously you could make the argument that once it doubles you could sell and invest in something else that subsequently doubles, but there's no guarantee those opportunities will be around or revalue quickly.

 

I don't think chronic discounts are a bad thing. Rather, you can invest in them and reinvest the dividends in the chronically undervalued security when you have difficulty finding better opportunities and then reinvest the dividends in other companies once you think you've found a quality double. These are simply a vehicle that allow you to compound the free cash flow coming into your portfolio each quarter rather than compounding capital gains. You wouldn't ever need to hold much cash if you knew you could reliably have a portfolio that would yield 10% in cash each year.

 

Am I wrong to think this way? It almost seems like the same reason Gio likes Lancashire. It replenishes his cash.

 

This is somewhat akin to Buffett's hope for a dwindling IBM stock price. I don't think it's illogical. But of course if the goal is to maximize your investment in the company you're far better off having the company repurchase stock than reinvesting your dividends.

[EliG]

Russia Urges Companies to Delist Abroad

http://www.bloomberg.com/news/2014-04-08/russia-asks-companies-to-delist-from-bourses-abroad-for-security.html

 

Russia urged companies to delist their shares from overseas stock exchanges and trade in Moscow in an effort to safeguard them as international sanctions mount against the country after its takeover of Crimea.

 

“This is a question of economic security,” First Deputy Prime Minister Igor Shuvalov told reporters after a government meeting near Moscow today. Speaking later in a telephone interview, he said the move isn’t mandatory and that companies should make independent decisions.

 

...

 

With foreign investors holding 70 percent of Russia’s stock free-float, a move away from Western markets would stoke a “further selloff,” according to Elena Loven, who helps manage more than 1 billion euros ($1.4 billion) in Russian stocks at Swedbank Robur in Stockholm.

 

[plato1976]

which russian stock is trading at 10% dividend yield ?

 

I've been thinking about Russia's chronic P/E problem and have begun to wonder if it really matters as long as the stocks maintain high dividends.

 

You have the opportunity to buy a stock that trades at 100 and pays a dividend of 10. Assuming no growth we can consider two scenarios over a 15 year holding period.

1) the stock doubles and dividend proceeds are reinvested

2) the stock remains at the same price and proceeds are reinvested.

 

Does it surprise you that investors actually stand to make more in scenario two? I guess my point is that the ability to reinvest at chronically depressed prices is a boon for investors over the long term. Obviously you could make the argument that once it doubles you could sell and invest in something else that subsequently doubles, but there's no guarantee those opportunities will be around or revalue quickly.

 

I don't think chronic discounts are a bad thing. Rather, you can invest in them and reinvest the dividends in the chronically undervalued security when you have difficulty finding better opportunities and then reinvest the dividends in other companies once you think you've found a quality double. These are simply a vehicle that allow you to compound the free cash flow coming into your portfolio each quarter rather than compounding capital gains. You wouldn't ever need to hold much cash if you knew you could reliably have a portfolio that would yield 10% in cash each year.

 

Am I wrong to think this way? It almost seems like the same reason Gio likes Lancashire. It replenishes his cash.

[fareastwarriors]

 

Russia, China Sign $400 Billion Gas Deal After Decade of Talks

 

 

http://www.bloomberg.com/news/2014-05-21/russia-signs-china-gas-deal-after-decade-of-talks.html

[randomep]

 

Russia, China Sign $400 Billion Gas Deal After Decade of Talks

 

 

http://www.bloomberg.com/news/2014-05-21/russia-signs-china-gas-deal-after-decade-of-talks.html

 

Plus no invasion of Ukraine after Crimea, russia stocks could go up 50% from here in a year......

 

 

[investor-man]

Anecdotally, I'm a little shocked that both Gasprom and Lukoil were both down a percent today

[fareastwarriors]

http://www.streetauthority.com/international-investing/value-guru-just-made-huge-investment-russia-30459722

 

 

Steve Romick -

 

 

According to recent filings, he has established positions in oil and gas giants Lukoil (OTC: LUKOY), Gazprom (OTC: OGZPY) and Rosneft (OTC: OJSCY).

[kai99]

What do you guys think of MBT

 

http://finviz.com/quote.ashx?t=mbt&ty=c&ta=1&p=d

 

Looks pretty beaten down

 

10 year financials earnings per share looks pretty alright

 

http://www.gurufocus.com/financials/MBT

[fareastwarriors]

Exxon Doing Russia Business as Usual Amid U.S. Sanctions

 

 

http://www.bloomberg.com/news/2014-05-28/exxon-sees-russia-business-as-usual-amid-sanctions.html

[phil_Buffett]

bought today after new sanctions are in place, more gazprom, rosneft and sberbank. longer term sanctions are for me not interesting. nobody cares in 2-3 years about them.

 

also have a already full Position in lukoil