by Jeff Reeves | April 15, 2010 10:33 am
When you look at the headlines, there’s not a lot to be rosy about in Russia right now. Two suicide bomb blasts on the Moscow metro killed 40 commuters at the end of March. Then a coup gripped the former Soviet republic of Kyrgyzstan, resulting in an overthrow of its president and a raid on the country’s coffers — prompting a $50 million lifeline from Moscow. And just last weekend, a plane crash on Russian soil killed Poland’s president, Lech Kaczynski, and his entourage of political elite.
Not a good few weeks for Russia. But don’t write off this emerging economic superpower just because of some poor headlines. The fact is that Russia stocks[1] have a lot to offer investors right now as the global economy continues to pick up steam.
Russia’s total economic output is bigger than Brazil, Canada or India — and growing day by day. The IMF expects Russian GDP to grow 4% in 2010, up from previous predictions of about 3.5%. Though the nation didn’t see quite the breakneck growth that other emerging markets experienced in the face of the recession, Russia is bouncing back strongly on the global recovery and should not be underestimated.
To help you share in the success of Russia in the months ahead, here are five top Russia investments that you should consider:
The simplest way to play the Russian economic boom is to cast a wide net with the Market Vectors Russia ETF (RSX[2]). It’s top three holdings include Russian energy giants Gazprom (OGZP[3]Y) and Lukoil (LUKOY[4]), which trade as pink sheets for U.S. investors, and Russia financial giant Sberbank which hold more than 50% of retail deposits and had a 31% share in Russian loan market.
The Russian ETF is up more than 200% from the 2009 market lows, including a 17% gain YTD in 2010 compared to a jump of just 7% in the Dow Jones Industrial Average. As the broader Russian economy continues to heat up, so will the Market Vectors Russia ETF. But fair warning when buying in: This ETF can sometimes be volatile, so make sure you buy shares during regular market hours and use limit orders so you know what you’re paying for this Russia fund.
Mechel (MTL[5]), an open joint stock company, through its subsidiaries, operates as a mining and steel company. The company engages in the production and sale of coking and steam coal concentrate, steam coal, iron ore concentrate, and nickel alloys that are used in the production of steel. It also produces semi-finished steel products and coke and coking products. Think of Mechel as kind of the U.S. Steel (USX[6]) of Russia.
Mechel shares have been on a tear lately, up a jaw-dropping 60% since Jan. 1. and about 400% since March 9, 2009, lows! There’s no secret as to why. As industrial production picks up in Russia’s economy and the rest of Asia and Europe, this top steel company will keep boosting output and sales. Mechel is a great investment to play the global economic recovery.
Wimm-Bill-Dann Foods (WBD[7]) manufactures and sells dairy products, beverages and baby food products across the Russian Federation. The company’s milks and cheeses are staples in any Russian icebox, and its juices and baby formula are very popular. It supplies wholesalers, supermarket chains and grocery stores across this nation of 140 million people.
WBD stock has been flat year-to-date, but that’s after a +200% run from the market lows in 2009. As in America, the recession has taken its toll on consumer spending in Russia and this staples stock has been one Russian company that has managed to keep sales strong even in the face of an economic downturn. As the recovery in Russia gains momentum, WBD should perform even better in the months ahead.
Though a telecom stock that is in the cell phone business, Vimpel Communications (VIP[8]) has the biggest potential as a broadband internet provider in Russia. Headquartered in Moscow, the company offers voice and data services through mobile and fixed-line providers mainly under the Beeline brand name. VIP boasts over 2.3 million residential broadband subscribers.
As Russia looks to modernize its workforce and move beyond its old manufacturing and industrial economy, Internet access is going to play a vital role. Only about 32% of the population has access to the Web, compared to a nearly 90% rate in Canada and a nearly 100% rate in the U.S. This provides huge growth potential for Vimpel Communications going forward.
Russia stock Mobile TeleSystems (MBT[9]) is really cashing in on the smarthphone boom in Russia and Eastern Europe. The company provides mobile communications services in the Russian Federation, Ukraine, Uzbekistan, Turkmenistan, and Armenia.
With its strategic partnership with European telecom giant Vodafone (VOD[10]), you can expect Mobile TeleSystems to become an even more dominant player in the Russian cell phone marketplace in the months ahead. MBT stock is up 20% year-to-date, and one top of that boasts a hefty annualized dividend yield of 2.7% as of this writing.
Tell us what you think here.[11]
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