We’ve touched on this a few times, but Citigroup’s Andrew Howell is back banging the drum on the dirt-cheap Russian stock market.
You might not have noticed, but Russian stocks have been spanking all of the emerging markets over the past several months.
Of course, the country’s oil exposure has a lot to do with it:
And despite the great returns, it’s still cheap:
Energy stocks represent nearly 60% of MSCI Russia’s market cap, versus just 15% in EM overall. To make Russia’s PE more comparable to EM, we have created a new Russia “sector neutral” PE that assumes that Russia’s sector weights are the same as in the EM index. Given that the energy sector PEs are so much lower than in other sectors, this increases Russia’s overall multiple from 6.9x to 8.7x. Not as cheap as it was, but still a considerable discount to EM’s PE at 10.6x.
If you hate the Fed-driven US market, think Europe is going to collapse, and want exposure to surging oil, without all of the revolution drama, here’s your choice.