Do you think all stocks are overvalued? Look further (into Russian stocks)

If you have been watching the Dow Jones setting new all time highs and believe all stocks are overvalued, then you are wrong. You might want to take a look into Russian stocks.

American and Russian stock market comparison

American stocks are indeed very expensive with a CAPE ratio (price relative to its past decade’s worth of average real earnings) of 29.  But if you look further, then you see that Russia has a CAPE ratio of 5.6 and a Price/earnings ratio of just 8. This means Russian stocks are your best buy if you just look to the financials.

Risks; Currency risk, Corruption and lack of transparancy

The first risk: fluctuating exchange rates. Most Russian companies receive a large portion of their revenues in Russian Rubles. This creates a currency risk , the risk of an investment’s value changing due to changes in currency exchange rates.

But there are some larger risks when buying Russian stocks, such as lack of transparency and corruption. Russia is ranked pretty bad on Transparency Internationals transparancy index. 

Transparancy International index
Transparancy International index

But if you believe Russia’s president Putin will find a way to improve international ties and maybe get the sanctions dropped,  than the russian market index will definately surge. Until then you can look forward to receiving some nice dividends every year.

Investing in stocks with large dividends

The market cap of the MICEX had a positive trend since 2009. It just hasn’t been growing as fast as the American stock market indexes.

Micex chart
Micex chart

 

My Russian stock picks

1. Aeroflot

Dividend of about 12 %.

Public Joint Stock Company Aeroflot – Russian Airlines (AFLT.ME), Russian airline.

Chart Aeroflot
Chart Aeroflot

 

2. Mobile TeleSystems

Dividend of approximately 9%

Public Joint-Stock Company Mobile TeleSystems provides telecommunication services in Russia, Ukraine, Turkmenistan, and Armenia. The company operates through three segments: Russia Convergent, Moscow Fixed Line, and Ukraine. It offers voice and data transmission, Internet access, pay TV, and various value added services through wireless and fixed lines, as well as sells equipment, accessories, and handsets. The company also provides system integration services and IT solutions.

Mobile TeleSystems stock info
Mobile TeleSystems stock info

3. Gazprom

Expected dividend approximately 6%

Public Joint Stock Company Gazprom, an energy company, engages in the geological exploration, production, processing, storage, transportation, and sale of gas, gas condensate, and oil worldwide.

chart gazprom
Gazprom

 

Conclusion

So if you are able to withstand the risk, and want to do some long-term investing while earning some nice dividends. Then you might want to take a look into the aforementioned Russian stocks.

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