Russia: opportunity for the adventurous

Russian stocks are at bargain levels right now. Here are three ways brave investors can buy in.

Is it time to take a fresh look at Russia? asks Jen Wieczner on Fortune.com. The crisis in Ukraine has sent foreign funds running for the exits, pulling an already-depressed market down by around 12% so far this year.

Major companies such as energy giant Gazprom have traded on price/earning (p/e) ratios as low as three in recent weeks, while the overall MSCI Russia was on a p/e of five at the end of March. "Investors who thought Russian stocks looked incredibly cheap before think they're practically irresistible bargains now."

Of course, there's good reason for this apparent cheapness. Political risk is high and the quality of most companies is poor. The Russian economy has been struggling for some time and sanctions by Western governments are set to make matters significantly worse, says Capital Economics.

Further capital outflows are likely to push the ruble down, spurring higher inflation that will eat into incomes and damage consumer spending. The central bank will be forced to keep monetary policy tight at a time when looser policy is needed to boost growth. Confidence will suffer and business investment, which was already weak, will stagnate.

So, there's no doubt Russia remains a risky destination and the outcome of events in Ukraine is entirely unpredictable. However, a crisis is often the best time to buy and at current valuations it still looks a good long-term opportunity for adventurous investors.

Ways to get access include the HSBC MSCI Russia ETF (LSE: HRUB), which invests in larger firms, while the Prosperity Voskhod Fund (AIM: PVF) is an investment trust specialising in small- and mid-cap stocks. Those who prefer open-end funds could consider Neptune Russia & Greater Russia, run by the experienced Robin Geffen.

Recommended

Invest in VCTs: tax-free investments set to break records
Investment strategy

Invest in VCTs: tax-free investments set to break records

Generous tax breaks make VCTs – venture capital funds – an attractive supplement to pensions.
21 Jan 2022
Index fund
Funds

Index fund

Index funds (also known as passive funds or "trackers") aim to track the performance of a particular index, such as the FTSE 100 or S&P 500.
18 Jan 2022
Seize these investment trust bargains in 2022
Investment trusts

Seize these investment trust bargains in 2022

Attractive investment trusts are trading at a discount, and those waiting for the perfect time to buy will miss out. Max King picks a selection of the…
17 Jan 2022
Five trends for fund investors to watch in 2022
Funds

Five trends for fund investors to watch in 2022

There is no crystal ball for investment, but these trends could help fund investors prepare for what comes next.
17 Jan 2022

Most Popular

Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022
US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022