At time when foreign investors are fleeing the Russian stock market, an investing guru advises to buy Russian stocks. Jim Rogers believes that companies listed on the Moscow Exchange are undervalued. That’s why he is buying their stocks.
“Russia’s stock market right now is one of the cheapest in the world, and probably one of the most hated,” said investor and commodities guru Jim Rogers, chairman of Rogers Holdings, told Reuters. “This is the time to buy Russia.”
There is an old investing adage that advises “to buy when the blood is flowing on the streets”, meaning that the moments of generalized chaos offer the best opportunities to find bargains. The crisis in Ukraine hasn’t produced massive bloodshed but the foreign investors were certainly scared, not by the possibility of a military operation in Ukraine per se but by the possible hard sanctions imposed by the US and the European Union. This unwarranted panic made them sell shares of Russian companies, giving smart and patient investors like Jim Rogers the possibility to buy Russian shares at bargain prices.
Rogers, who has been a vocal supporter of investing in Russia for the last year, told the press that he used the sell off of the last week to buy Russian stocks. He also stressed that more sanctions against Russia will generate new buying opportunities. Somewhat surprisingly, Rogers is mostly interested in finding non-energy companies listed on the Moscow Exchange, probably because such companies have been hit the hardest by the recent events in Ukraine. Energy companies like Gazprom or Rosneft are generally considered to be better insulated from the consequences of western sanctions. It is hard to imagine that the European Union will agree to rescind the contracts with Gazprom and risk plunging its economy into recession because of the rising energy prices and natural gas deficit. It is difficult to imagine how sanctions could disrupt the operations of Rosneft or Lukoil because oil companies have the possibility to redirect their oil flows to China, India and other countries who don’t support the sanctions against Russia. However, if one wishes to replicate the investment strategy used by Jim Rogers, the most likely candidates for inclusion in a Russian stock portfolio would be Sberbank (the biggest Russian bank), Magnit (operator of a chain of discount supermarkets) and VimpelCom (telecommunications company), as those three companies were in the top 10 of Russia’s companies by market capitalization by the end of 2013.
Reprinted from The Voice of Russia.