I have been invested in YNDX for the last year or so since it was an RB rec. The recent selloff in Russian stocks has taken off about 1/3 of Yandex’s market cap. What we have here is a 25-30% grower with $1.5 net cash on its balance sheet and secular tailwinds, selling at about 24x trailing earnings. I have used this as an opportunity to add more shares.
I am also interested in QIWI, which is a leader in Russian online payments which is also expected to grow 25-30%, and pays a cash dividend yield of 3.5% at current prices. I wrote some puts on QIWI today, but I am looking to get more opinions/thoughts on Russian event risk, currency risk, and how these companies may be affected.
How does Russia handle taxes on dividends to foreigners? Do they withhold a certain % before payment? Just curious as the vast majority of my funds are in retirement type accounts.
I like to have a global exposure in my portfolio. I own a handful of companies with headquarters outside the US and I own quite a few companies (more than 1/2) that are multinational which significant sales in overseas markets. I am a believer that much of the overall global growth in this century will come from Asia and I want exposure to that. I strongly prefer investing in companies that are based in politically stable countries with strong laws that favor and protect companies. I have completely avoided Russia for several reasons. First, corruption is a huge problem. The country is run and controlled by a group of oligarchs. Putin is really a dictator and simply jails people who are a threat to his power. He is probably the world’s richest person. I believe that there is some risk of a revolution at some point. I’m sure the situation in Ukraine has those in charge of Russia very nervous. For me the political situation is not worth the risk so I stay away. Second, Russia has a demographic problem in that population is shrinking. Economies need growing populations of working age people to grow. Third, the Russian economy is highly dependent on energy, yet the Russians have repeatedly threatened the countries that they supply with natural gas with supply interruptions. Europe is dependent on Russian energy today but will be ever more interested in finding other sources that they see as more stable; the US will probably allow LNG exports at some point. This will take time as the infrastructure doesn’t exist yet.
Yandex might be an exception but I just see the political too high. I recently opened a position in MELI which has seen growth greater than 30% for a long time. Yes, there are risks in some Latin American countries but I believe that MELI is doing a great job at mitigating much of the risks. For example, they convert their cash flow from Argentina to USD and they convert their cashflow from Venezuela to real estate purchases.
Yandex might be an exception but I just see the political too high. I recently opened a position in MELI which has seen growth greater than 30% for a long time. Yes, there are risks in some Latin American countries but I believe that MELI is doing a great job at mitigating much of the risks. For example, they convert their cash flow from Argentina to USD and they convert their cashflow from Venezuela to real estate purchases.
I too have avoided companies that are focussed on any single country. Yandex is too risky for me, although it may land up being a fine stock to hold. For similar reasons, I 'm not investing in companies like Baidu, although it has been a great winner for early investors.
I really like MELI, which is essentially the EBAY of Latin America. It’s been growing revenues at 30-40% rates for a while, and will continue doing so for the foreseeable future. It is volatile, and is hit hard when there are currency related headwinds. But, its only a 6B or so market cap company serving a population as large as the US. MELI would continue to benefit from the growth and prosperity in the middle class bracket.
Price Smart (PSMT) which is essentially the COSTCO model in Latin America. That company would also do well over time.
Chris, a wonderful discussion on the dangers of investing in Russia. Thanks. Those are some of the same reasons I’ve avoided Russia, and I didn’t even think of the declining population.
I am long on YNDX and QIWI. Neither is for the faint of heart investor, that is for sure. And there are probably at least several other less volatile out there to invest in.
I am more confident in YNDX than QIWI. QIWI is involved in money changing and that’s a political hot button for the Russians right now and of course there is also the disreputable ‘oligarch’ aspect of the banking business in that part of the world to contend with. So that one is really speculative for me.
I see YNDX as an interesting company that has a very good growth trajectory ahead but with lots of impediments and unknowns to contend with given Russia’s economy, politics, etc. Nevertheless, I just read a very favorable piece by one of the major TMF analysts who was recommending it as a ‘buy’ today. I’m in the rather adventurous/foolhardy? camp that believes for those with great fortitude it’s a good time to buy on this dip.