| | | I think the big risk with russian stocks is not that the companies itself will be hurt, it is the risk that foreign holders if Russian stocks are finding themselves between the anvil and the hammer. It is quite possible that if western sanctions escallate (which I think is highly likely) that the russians decide to screw foreign shareholders over. Short of just disowning them, they could just restrict dividend payments to ADR owners, cancel voting rights and possibly many other unpleasant things. Lukoil as a company is pretty hard to kill ad a company, but it is very easy for the Russian governement to cancel the piece of paper that states that you own a piece of it.
Right now it seems like you get a 50% discount for russian equities relative to what you would need to pay for a comparable European or US company. I would argue that given the current circumstances, this is not enough.
Some of the worst deals currently are western companies having large operations in Russia. The Danish Carlsberg brewery trades at a low teens PE, but obtains almost 40% if their profits from Russia. This seems like an extremly bad risk reward to me, since I think that foreign companies owning ops in Russia are far more vulnerable that Russian companies with a low percentage of foreign shareholders.
FWIW, I think the russian economy is very vulnerable to sanctions, since most exports are related to oil and gas. In addition, the Russian oil industry is dependent on western technology.
Europe is dependent on gas from russia, but the heating season is over for this year, so the russian timing for throtteling the supply is not good. In addition, the gas contract are still heavily indexed crude, which makes it a quite expensive source of Energy. In the short run, it's hard to replace a large supply, but alternatives can developed and that would hurt Russia quite a bit.
I do think I would buy stocks in Europe, if we see collateral damage from the issues in the Ukraine. |
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