Yale professor Jeffrey Sonnenfeld has become a bit of a celebrity these days after he and his research team at the Chief Executive Leadership Institute put out a list of the companies still doing business in Russia. The names on the list would not be considered stocks to buy.
However, those businesses that have exited the country would have to be considered ESG superstars. It takes having a moral compass to do the right thing. Many American companies have stepped up and gone the extra mile to show solidarity with Ukraine.
It’s a rare case where capitalism’s come together for a cause other than the almighty buck.
“‘We have a history of seeing the value of business leaders affirming the truth and taking a stand,’ The Washington Post reported Sonnenfeld saying. ‘CEOs need peer approval,’ he added, noting that they often try to avoid standing alone on issues or policies.”
So, which companies have closed up shop in Russia? Over 400 have withdrawn from Russia. Sonnenfeld’s list is so long now that it’s divided into five parts.
I’ve selected seven companies from seven different sectors. This way you can make a little anti-Russian portfolio if you like.
Успіхів (Ukrainian for good luck).
- Accenture (NYSE:ACN)
- AerCap Holdings (NYSE:AER)
- Clarivate (NYSE:CLVT)
- BP (NYSE:BP)
- Equinor (NYSE:EQNR)
- Uber Technologies (NYSE:UBER)
- TJX Companies (NYSE:TJX)
Stocks to Buy: Accenture (ACN)
If you go through the entire list of companies pulling out of Russia, you will see that the names actually pulling out of the country are few. Most are suspending operations. Most will likely return once the war is over. Sad, but true.
On March 3, Accenture announced that it was discontinuing its business in Russia, putting 2,300 Russian employees out of work. While it doesn’t have a Ukraine business, Accenture donated $5 million to a nonprofit relief organization helping Ukrainians both inside and outside the country. The company also matched any donations from its employees.
As of Aug. 31, Accenture had more than 624,000 employees worldwide, so the cut was just 0.4% of its total workforce. However, it’s the gesture that counts.
If you’re a free cash flow (FCF) hound as I am, Accenture has a trailing 12-month (TTM) FCF of $6.78 billion. That’s good for a 12.0% FCF margin. Its FCF yield is 3.3%. That’s about right for a company growing sales by double digits.
AerCap Holdings (AER)
I originally was going to put Avery Dennison (NYSE:AVY), the label maker, on this list of seven stocks to buy. Although Sonnenfeld’s list says it’s exiting its Russian operations, the company’s 10-K lists no Russian facilities. In the past, the company has invested in Russia. However, the company has issued no press releases that I can find.
So, I’ve added AerCap, the world’s largest aircraft leasing company.
On Feb. 28, it filed a Form 6-K with the Securities and Exchange Commission. In order to comply with the sanctions against Russia, it has ceased its leasing activities with Russian airlines.
Approximately 5% of AerCap’s fleet is to Russian airlines. AerCap has 142 planes leased to Russian airlines, the largest exposure of any foreign company. It’s unlikely it will be able to repossess them.
AerCap’s stock fell to a 52-week low of $43.75 earlier in March on fears the planes would be permanently gone. AER has since recovered about $10 of those losses.
Other than Russia, AerCap’s business is performing very well at the moment. Those who bought in the $40s have done well.
The data analytics company released a press release on March 11 that stated it would cease all commercial activity in Russia.
“Clarivate has made the decision to close its office in Russia effective immediately and we will work to cease commercial activity in Russia in the coming weeks,” the press release stated. “Clarivate will work closely with our customers to manage the impact of our actions to their business and provide them more information as our process moves forward.”
The company doesn’t break out revenue by country in its 10-K except to say that the U.S. accounted for 46% of its $1.9 billion in revenue in 2021. Its Asia/Pacific region, which I assume includes Russia, accounts for 21% of its revenue and 44% of its workforce.
It’s safe to assume that Russia is not a big part of the $396 million in revenue it generated from the Asia/Pacific region in 2021.
In 2021, Clarivate had FCF of $205.2 million, 32% higher than 2020 and 330% higher than 2019. Down 32% YTD, it’s a buy.
Stocks to Buy: BP (BP)
On Feb. 27, BP announced that it would sell its 19.75% stake in Rosneft, the stake it’s held in the giant Russian oil company since 2013. CEO Bernard Looney and another BP-nominated board member have resigned their positions on the board. BP will no longer report Rosneft’s production, reserves, and profits in its financial results.
According to Reuters, Rosneft accounts for 50% of its oil and gas reserves and one-third of its annual production. The writedown of its Russian investment could add up to as much as $25 billion.
Despite the exit, BP’s share price has barely budged since the announcement. It’s down less than 4%.
In January, I recommended BP stock, suggesting that the company’s plans to transition to renewable energy make it an oil and gas stock I can stand behind. With the Rosneft exit it only accelerates the transition.
Yielding 4.4%, get paid while it works its way out of the fossil fuel business. It’s a bold move.
On Feb. 28, the Norwegian government-controlled oil and gas company announced that it would stop new investments into Russia and begin exiting its joint ventures in the country. Equinor has been in Russia for 30 years.
“At the end of 2021 Equinor had USD 1.2 billion in non-current assets in Russia. We expect that the decision to start the process of exiting joint ventures in Russia will impact the book value of Equinor’s Russian assets and lead to impairments,” the company stated in its press release.
I recently recommended EQNR stock for the coming risk-on rally. The impairment is a drop in the bucket for the company. In 2022, it plans to buy back $5 billion of its stock, 4x the value of its Russian assets.
As I said in my article, the company will generate $45 billion in free cash flow between 2021 and 2026. If oil prices stay above $100 for very long, that number could jump exponentially over the next few years.
Equinor’s move isn’t BP bold, but it’s a statement nonetheless.
Uber Technologies (UBER)
Uber first got involved with Yandex (NASDAQ:YNDX) in July 2017. The joint venture deal saw it contribute its Uber ride-hailing and Uber Eats businesses in Russia with Yandex’s taxi operations. At the time, it was valued at $3.7 billion. The deal was made by former CEO Travis Kalanick.
On Feb. 28, the company said that it would accelerate its plans to exit its Russian joint venture. As part of the process, three Uber executives resigned from the Yandex board. Many of its Yandex investments were sold in 2021. It still owns 29% of Yandex.Taxi.
“‘We are actively looking for opportunities to accelerate the sale of our remaining holdings and, in the meantime, will remove our executives from the board of the joint venture,’ The Daily Mail reported a spokesperson for Uber said.”
On March 7, Uber raised its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guidance for the first quarter to $140 million at the midpoint of its outlook, up from its previous guidance of $115 million.
The company also said the number of trips taken is back to 90% of those in February 2019. It believes the summer travel season will be very busy for its ride-hailing operations.
It continues to inch closer to profitability.
Stocks to Buy: TJX Companies (TJX)
TJX filed an 8-K with the SEC on March 3. The company announced that it is selling its 25%, non-controlling stake in Familia, a Luxembourg-based off-price retailer with more than 400 stores in Russia. JX’s two representatives on Familia’s board have resigned their positions.
The company originally paid $225 million for its stake in Familia. The stake was valued at $186 million at the end of January. It will possibly have to take a charge for this investment once it’s ultimately sold.
Investors can rest assured that TJX’s primary businesses are doing very well.
It reported Q4 2022 results in February that included 13% same-store sales growth over Q4 2020 for stores open in the U.S. Overall revenues were $13.9 billion, 14% higher than Q4 2020. For all of 2022, its EPS was $1.04, 13% higher than in 2020.
TJX is back, baby.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.