Don't 'Russian' To These ADRs - Analyst Blog
The situation developing between Russia and the Ukraine is quickly becoming a hot topic in international geopolitical debates. I have already been asked by a handful of individuals what I think the impact will be on our market. My basic reaction is if Yellen doesn't care about it right now then neither do I. I admit it, I'm a Fed watcher.
Although the situation may not create a headwind for our market, it certainly is having an impact on Russian ADRs traded here in the US. Remember, ADRs traded in the US represent a specified number of shares in a foreign stock. This is different from a stock that does business in Russia but is traded here like YNDX and CTCM. Initially I was hoping to find some gems. I wanted to see Russian ADRs with Zacks Rank #1 (Strong Buy) or #2 (Buy). My thought process was find solid earnings stories that are technically being beat down due to the news overseas, keep them on the radar, jump in when the technical picture strengthens.
What I found is two Zacks Rank #3 (Hold) and one #4 (Sell) stocks. Two of these had ugly charts before anyone learned how to pronounce Crimea. One of them looks like a momentum stock that pulled back from its highs and found support at a key level.
Six months ago Mobile Telesys ( MBT ) looked like a darling. The stock was trading near $24, up from $17 in late June 2013. Since then, deteriorating fundamentals and earnings revisions to the downside have weighed the stock down and placed it firmly into a Zacks Rank #4 (Sell). The chart doesn't give much hope for a long term turnaround either. After a dead cat bounce in December, the stock has traded below the 25 day moving average shifted by 5 (25x5 SMA) and continues to sell off. Today the stock is down big on heavy volume. This negative move could be a washout level and give short term support but the longer term fundamental picture will likely overshadow any positive momentum for the stock.
The first Zacks Rank #3 (Hold) stocks is Mechel Steel Group ( MTL ). Usually I screen stocks under $5 but since there are only a few Russian ADRs I decided to take a look under the hood. The price and consensus chart pretty much sums up reasons for MTL's demise. Over the last several years the company has gone from making $4 a share to losing money. As a result, we've seen the stock sell off considerably. In early 2011 Mechel Steel traded in the low $30s, a far cry from today's $1.76 print. Down again today on news of the conflict I think we need to look for other stocks to profit from.
QIWI PLC ( QIWI ) is a former momentum stock that potentially has some meat left on the bone. The earnings picture paints it as a Zacks #3 (Hold). Technically, we have a big run from a late May low of $14.51 to a December high near $59.25. Using this as a point of reference we can draw a few Fibonacci levels to give us some idea of potential areas of support on this drop since the high. The 23.6% retracement didn't provide much support on the initial drop but sure was resistance on the way back up. Just shy of $50 the stock reversed and now sits down at $38.82.
There is a silver lining to the cloud here. The 25x5 SMA sits below the current price at $38.34 giving some support on a big down day. Parked just below that, the 50% Fibonacci retracement at $36.88 must hold if the stock is going to head higher in the short term. A break of $36.88 exposes the 61.8% retracement at $31.60 for the next downside target. Of the three stocks we looked at today, this is the best technical story we have.
MOBILE TELE-ADR (MBT): Free Stock Analysis Report
MECHEL OAO ADS (MTL): Free Stock Analysis Report
QIWI PLC-ADR (QIWI): Free Stock Analysis Report
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