H-M,
The latest issue of Barron's has an interview of a Fund Manager who sees Russia as the best place to invest today. This thread should be interested. I copied the introduction and the key parts below.
Larry
"A Contrarian's Take on the World
Interview With Rudolph-Riad Younes, Co-manager,
Julius Baer International Equity Fund
By SANDRA WARD
RUSSIA IS THE PLACE TO BE. TAKE THAT HOT TIP to the bank, since it comes straight from the lips of one of the most successful international stockpickers, Rudolph-Riad Younes. He and his colleague, Richard Pell, consistently have outperformed the broad market averages and their international benchmarks by a wide margin, by being contrarian and opportunistic. More remarkable, they have continued to do so even as the collective assets for which they are responsible have mushroomed to $63 billion. This year, their fund is up a smart 18.4%, compared with 6.6% for the S&P 500 and 13.4% for its peer group. In the past five years, the Julius Baer International Equity Fund has advanced 25.6% a year on average, versus 11.6% for the S&P 500 and 21.3% for the MSCI EAFE index. Riad recently sat down with us at Julius Baer's Manhattan headquarters to share his thoughts."
"How do you think the emerging markets as a safe-haven theme will play out?
You are asking the wrong person because we have been very pragmatic. We have added some exposure to Southeast Asia, but we're not big advocates. There will be a delayed coupling as opposed to a decoupling. There will be a lot of spending in China ahead of the August '08 Olympics, and it may take awhile before the weakness in the U.S. trickles down to Asia. We have exposure to emerging markets more from a risk-management perspective as opposed to any conviction on the region. But our favorite market in the world for next year is Russia. With oil around $90 a barrel, it doesn't make sense that Russia is one of the worst-performing emerging markets this year. The country has one of the most aggressive tax systems -- crude export duty is about 89 cents on the dollar for oil over $25 a barrel.
Isn't there concern about contract law?
Russia is not a big market for our multinational corporations compared with, say, China. U.S. multinationals are basically helping the Chinese government catch its dissidents. In Russia, where [President Vladimir] Putin has an 80% approval rating, we are pestering him. We are being hypocritical. There has been some backpedalling on reforms, but sometimes you have to take one step backward to take two steps forward. For me, the politics is a non-issue.
How are you investing in Russia? Oil plays?
Oil plays are relatively cheap. Though they are being punished by a very aggressive tax regime, ultimately there will be a different tax regime because the cost of exploration has gone up dramatically and these companies need compensation. That's why we don't see a lot of new development today in Russia. In order to see new fields and development there needs to be a better tax regime. That's a hidden catalyst in the future. The consumer and domestic-oriented sectors will be in the sweet spot for the next few years as the country is awash with money and foreign reserves. The government has announced it is going to spend about a trillion dollars in the next five years. I am interested in the broad Russian index. I don't have specific companies." |
