(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Data sourced from Finviz.)
Karim Rahemtulla, writer for Wall Street Daily, believes Russia’s recent economic woes places the country’s market in an undervalued position that presents valuable investing opportunities.
Russia is a bit of an enigma to many Americans who know little more than the glimpse James Bond movies have offered. In layman’s terms, the country’s social and economic policies are more than a bit shaky.
Politically, the country is commonly accepted to be “controlled by a small group of oligarchs with very strong ties to the Kremlin.” WorldAudit.org ranks Russia #127 of 200 on a list of corrupt countries, on the same level as Kenya and the Republic of Congo.
Economically, the country generates large profits as the world’s number one oil producer – but the profits are largely tied up in assets in which the general population and national businesses do not hold much stake.
So where’s the beef? According to Rahemtulla, “Russian ruler-for-life, Vladimir Putin (pictured left), decided a few weeks ago that it was time to take back the Presidential reigns from Dmitry Medvedev.” And given Putin’s track record of rallying the Russian economy, his return could have some substantially positive effects on the market.
“Putin’s an egomaniac and a ruthless leader. He’s the only Russian president who’s genuinely a capitalist at heart. And he’ll do whatever it takes to enrich himself and his cadre of oligarchs. He did it for 10 years between 1999 and 2009.”
Indeed, GDP growth more than doubled since he took office in 1999 and only dipped during Medvedev’s reign. If Putin returns in his former capacity, he could potentially put more growth policies in place.
Rahemtulla is quick to point out that Russia is very much a land mine for investors, and it would be folly to invest directly in the country given its instability, but that there are some promising approaches in Russian American depositary receipts (ADRs).
Social disparity aside, do you think Putin could rally the Russian economy again?
To help you get started in exploring this idea we list the three Russian companies trading on US exchanges below. Use the data and tools as a starting off point for your own analysis.
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1. CTC Media, Inc (CTCM): Operates as an independent broadcasting company in Russia. Market cap of $1.78B. This is a risky stock that is significantly more volatile than the overall market (beta = 2.5). The stock has lost 47.88% over the last year.
2. Mobile Telesystems OJSC (MBT): Provides telecommunications services primarily in the Russian Federation, Ukraine, Uzbekistan, Turkmenistan, Armenia, and Belarus. Market cap of $14.50B. The stock has lost 36.97% over the last year.
3. Mechel OAO (MTL): Operates as a mining and steel company in the Russian Federation and internationally. Market cap of $4.85B. This is a risky stock that is significantly more volatile than the overall market (beta = 2.7). The stock has had a couple of great days, gaining 9.09% over the last week. The stock has performed poorly over the last month, losing 23.22%.