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Strategies & Market Trends : Investment in Russia and Eastern Europe
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To: baystock who wrote (428)8/13/1998 6:06:00 PM
From: Rob Shilling  Read Replies (3) of 1301
 
I don't think it is a long shot to buy Russia.
I think the bottom is near or past now that the Russian market is near all time lows. Today LUKOY traded below 20 for the second day in a row but ended up near 23. The oil price surge on the Saudi cuts in production could add some optimism. As the PM says, it is just pure psychology affecting this market. Tax revenues are rising, oil prices will go back up eventually.
Look at some of the numbers and ask yourself, when is the worst case scenario priced in? LUKOY could actually benefit from a ruble devaluation (oil is priced in $s), yet it is trading at something like 1/3 book value, and 1/3 sales. After BP buys Amaco, BP-Amaco will still not have the reserves that LUKOY does. Look at ROS, book value is 24, the forward-looking PE is 4 (and it is a monopoly). VIP was temporarily down near its all-time low.
Russia is priced at fire-sale prices, the MT index only has volume traded in 15 or so shares, those shares have a combined market cap of around $20 billion.
It is all psychology, shorts trying take advantage of the fact that Russia is new to the capitalism game. Russia has not yet learned how to play the game. Russia lacks a consistent voice on implementation and that scares foreign investors. The ace in the hole for Russia, is the west won't let Russia collapse. So now is the time to buy Russia IMHO. Just think if LUKOY went back to 120 when it still had a small capitalization compared to RD and BP. 6 times your money !!! You are not going to make that kind of money in internet stocks with $7 billion in market cap and little or no earnings.
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