Russia Leading the BRICs
The best-performing BRIC market for the first quarter was Russia, largely due to the surge in oil prices and signs that the Putin/Medvedev team is warming up to investors in the vast natural resources sector. As I’ve mentioned, I like Lukoil (OTC: LUKOY) a lot. But those interested in Russia for the long haul should also keep Gazprom (OTC: OGZPY) in mind. The stock has been exceptionally strong in 2011, trading at a new 52-week high as I write.
Since Gazprom is the largest company by market capitalization in the Russian market, the extreme relative strength we are seeing likely signifies a major institutional investor allocation into Russian equities. And this is probably a phenomenon that will continue for longer than the current quarter, which makes the stock a good one to hold in the current environment. After all, Gazprom has the largest reserves of hydrocarbons of any publicly traded company in the world.
For investors looking for broader exposure to the Russian market, I would consider the Market Vectors Russia ETF (NYSE: RSX).
India Making a Comeback
January was a horrible month for Indian investments, but they have bounced back a lot since, and I think that the comeback is far from over. As long as the Indian central bank is trying to slow credit growth, the Indian market will be in a trading range, a process that I think should play out in 2011.
Surging oil prices are a problem for India, considering that the country imports about 70% of its oil, and the price of crude isn’t likely to decline much in the present environment. Still, quality investments on sale — such as Tata Motors (NYSE: TTM) and the Market Vectors India Small Cap ETF (NYSE: SCIF) — make sense at present levels.
Brazil Good for the Long-term Investor
Brazil is one country that does have a lot of oil, and the performance of Petrobras (NYSE: PBR) clearly shows that the higher oil goes, the better it is for the Latin American energy giant. This is because of the very high (but still unknown) costs associated with the development of its deep-sea oil fields. This is the perfect long-term holding for believers in the peak oil theory, as the high costs will still be worth it in such an environment.
For a Brazilian company with a more certain earnings profile, consider Banco Bradesco (NYSE: BBD), which benefits from increased lending to consumers and corporations as the Brazilian economy develops on the heels of high commodity prices and prudent government reforms. The shares trade at 10 times forward earnings and 2.7 times book, which is a good value for a rapidly growing bank.