Markets

Don't Let The Ukraine Crisis Go To Waste: Buy These 3 Stocks Instead

Rodney Dangerfield said it best in the movie " Caddyshack" when he was talking to his broker while playing golf.

"Buy, buy, buy! Oh, everyone's buying? Then sell, sell, sell!"

The quick lesson from this is many times it is best to not follow the crowd. Instead, do the opposite -- and history shows that times of crisis have proven to be some of the best times to invest.

Right now, the market everyone is selling is Russia, driven by its incursions in Ukraine. Some of the hardest-hit stocks include VimpelCom (Nasdaq: VIP ) , Yandex (Nasdaq: YNDX ) and Gazprom ( OGZPY ) .

VimpelCom is down 36% year to date. Yandex is down 24% and Gazprom is down almost 5%. Are they worth buying on this pullback? Let's take a closer look

The Best Russian Telecom To Own

VimpelCom is a leading telecom in Russia, Ukraine and many other parts of the former Soviet Union. In Russia, VimpelCom owns the #3 carrier, and in Ukraine, it owns the largest, Kyivstar. In total, the company has more than 218 million mobile subscribers.

Over the last four years, VimpelCom has sought to lessen its reliance on Russia as it expanded into Europe, Asia and Africa. In Italy, the company owns Wind, the second-largest fixed-line operator and the third-largest mobile carrier.

VimpelCom benefits by having long-term investors behind the company. Its two largest shareholders are billionaire Mikhail Fridman's Alpha Group and Norwegian telecom giant Telenor ( TELNY ).

For investors, shares of VIP have entered deep-value territory. VimpelCom is trading at only 8.8 times next year's earnings and an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of only 3.8. Its price/earnings-to-growth ( PEG ) ratio is only 0.3. It's also paying a dividend yield of 10.8% right now.

The Best Russian Internet Stock To Own

When most investors think of search engines, Google (Nasdaq: GOOG ) comes to mind -- but n Internet-savvy Russia, Yandex accounts for 60% of all online searches. In fact, Yandex is a diversified Internet company that operates the world's fourth-largest search engine. Yandex.ru is the most popular home page in Russia and has a strong presence in Ukraine and the other former Soviet republics.

Yandex is also a well-run company. It has an operating margin of 30% and a return on equity of 32%. Compare that with Google's operating margin of 23% and return on equity of 14%.

For investors, Yandex has also become the cheapest search engine to own. Shares are trading at only 22 times earnings and have a PEG ratio of only 0.8. Compare this with Google, which trades at nearly 30 times earnings.

The Best Russian Supermajor To Own

Gazprom is the world's largest producer of natural gas. The Russian government is the majority owner, and the European Continent relies on the company for the bulk of its gas supplies. Gazprom also has the largest network of gas pipelines in the world.

Since the Russian government controls Gazprom, it has kept many investors from buying shares. Gazprom has been at the center of many of its disputes with Ukraine. Currently, Ukraine owes Gazprom about $3.5 billion, and President Vladimir Putin is insisting on payment -- or exports will be cut off to Ukraine.

The use of Gazprom as a political tool has made the company incredibly cheap. Shares are trading at only 2.9 times next year's earnings and an enterprise value-to-EBITDA ratio of 2.0.

This compares favorably with Exxon Mobil (NYSE: XOM ) , which trades at 13.2 times next year's earnings and an EV-to-EBITDA multiple of 7.

Risks to Consider: All three companies have significant exposure to Russia and Ukraine. If the crisis persists for many years, it could depress returns longer than expected. For investors, it is best to take a long-term approach when investing in companies with exposure to Russia and Ukraine.

Action to take --> Once the situation stabilizes, shares of VPI should return to where they were at the start of the year. This would put shares trading around $12 for upside of 50%. Buy shares of Yandex with a price target of $38 for upside of over 20%. This would put shares trading at the same valuation as Google. Buy shares of Gazprom with a $16 price target for 100% upside. This would still put shares trading at only about 6 times next year's earnings, which is still less than half of Exxon Mobil's earnings multiple for next year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

© Copyright 2001-2016 StreetAuthority, LLC. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

OGZPY PEG TELNY

Other Topics

Stocks

Street Authority

Founded in 2001 by industry veterans, StreetAuthority is a financial research and publishing division of Investing Daily. Our mission is to help individual investors earn above-average profits by providing a source of independent, unbiased — and most of all, profitable — investing ideas. Unlike traditional publishers, StreetAuthority doesn’t simply regurgitate the latest stock market news. Instead, we provide in-depth research, plus specific investment ideas and immediate action to take based on the latest market events.

Learn More