As the United States and the European Union impose some of the toughest sanctions ever seen against Russia, could the contrarian investor be sniffing an opportunity to invest in Russian stocks?
Since taking military action against Ukraine, Russian stocks have had their sharpest fall in history.
After hitting a record high in October, the benchmark MOEX Russia Index has fallen around 50% – wiping out at least US$250 billion in value.
This makes it easily the worst performing stock index so far in 2022.
Here are three Russian stocks that could have sound long term growth prospects, despite the historic volatility and devastation in the region.
Three Russian stocks to consider buying as war breaks out
Gazprom (MCX: GAZP)
After hitting an all-time-high of RUB367 in October 2021, the Russian state-owned energy giant has fallen around 35% since the outbreak of war.
Gazprom is the largest natural gas producer in the word and owns gas pipelines that allow gas to flow into northern and Southern Europe.
The White House listed Gazprom as one of 13 major state-owned companies that would be prevented from raising money from the US market, following the Ukraine invasion. However, the company is in a powerful position as much of Europe relies on its gas.
European gas futures spiked a staggering 60% following the invasion and, get this, Gazprom accounts for 16% of global natural gas reserves.
Related on Asia Markets: Global power shortages a primer to historic natural gas bull market
Moscow Exchange (MCX: MOEX)
Moscow Exchange has crashed around 50% since hitting an all-time-high of just over RUB187 in May 2021.
As the name suggests, Moscow Exchange is Russia’s main stock exchange, with its only real competitor being the much smaller Saint Petersburg Stock Exchange.
It ranks among the world’s top-30 exchanges for total value of equity trading, and among the top-10 global exchanges for exchange-traded derivatives. It is also a top global exchange when it comes to the total value of bond trading.
The Moscow Exchange has an attractive dividend policy with a track record of distributing 55-89% of profits between 2014 and 2020.
While the Ukraine invasion will no doubt have an impact, the company has recorded an impressive compound annual growth rate of around 17% between 2006 and 2020.
Stock exchanges generally perform well as defensive plays during periods of market volatility.
Ozon Holdings (NASDAQ: OZON)
Listed as an ADR on the NASDAQ, Ozon holdings has crashed 61% year-to-date.
Ozon is an ecommerce company which is often referred to as the “Amazon of Russia”. It has been building a presence in Russia since 1999 and most recently has been growing sales at an annual clip of around 60%.
During the final quarter of 2021, Ozon recorded more than one million orders per day on its platform. The company says this was a year-on-year increase of 200% and the eighth consecutive quarter with order growth exceeding 100%.
At December 31, 2021, the Company had cash and cash equivalents and short-term bank deposits of RUB126 billion, compared to 119 billion at September 30, 2021.
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