Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Most Exciting Biotech Stock Of The Year? - 17th May 21
Gold Mining Stocks Fundamentals - 17th May 21
Junior Gold Miners Should be Rallying – What’s Holding Them Back? - 17th May 21
Stock Market - Should You Be In Cash Right Now? - 17th May 21
Learning the Financial Markets - 17th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Cash In Big on Russia’s Tech Stocks Market

Companies / Tech Stocks Mar 28, 2014 - 03:11 PM GMT

By: Money_Morning


William Patalon writes: There's an old French proverb that says: Achetez aux canons, vendez aux clarions. That's "buy on the cannons, sell on the trumpets."

As a dyed-in-the-wool Contrarian investor, I'm a firm believer in the precept. In fact, back in the late 1990s, when New York money manager Anthony M. Gallea and I penned our book Contrarian Investing: Buy and Sell When Others Won't and Make Money Doing It, one of the opening lines was "Gloom makes us glad."

Bad news, you see, can create some of the biggest profit plays that you're going to find. Most retail investors just about stampede their way out of "bad-news" stocks. Those stocks get hammered down to ridiculously cheap levels.

For shrewd investors, this kind of situation creates a double-barreled winner because:

  • Well-chosen "bad-news" stocks can often recover their way to their former highs, meaning you have a built-in profit that you don't enjoy with most other stocks.
  • And, believe it or not, you also often face lower risks - since "bad-news" stocks have reached severely "oversold" levels. That means that the risk of additional downside moves has been minimized. This kind of terrific "high-reward/low-risk" stock can be the best kind of Contrarian play to find. And the best kind of "bad-news" stock to find is one where "external events" (those not related to the company's own operations or businesses) are the culprit behind the sell-off.

Now you see why I spend a lot of my time perusing the headlines and getting the "story behind the story" with some of the world's scariest news headlines.

You see, I know that, hidden in the "background noise," are some huge potential profits.

That's why I often look at the biggest negative news stories out there - and then look behind the headlines to see all the appealing investments the bad news is creating.

And right now, one of the splashiest "bad-news stories" you'll find is Russia...

And all that stuff about Ukraine, the Crimea, and Vladimir Putin has investors just about trampling one another to get out of Russian stocks.

And that's a big mistake.

In fact, Russian stocks - especially Russian tech stocks - offer some of the biggest profit opportunities we see today.

And there's one in particular that offers a massive potential upside.

And, best of all, it's a tech stock.

And since it is a tech stock, I called in our resident tech expert, Radical Technology Profits Editor Michael Robinson. I often consult with him in my Private Briefing column.

And so you can reap the maximum benefit from our discussion, I'm offering a partial transcript of the interview that I conducted with Michael late last week:

A Conversation with Michael Robinson

Patalon: As you know, Michael, I'm a longtime Contrarian. And there's an old French proverb that tells us to "buy on the cannons, sell on the trumpets."

So when I see what's happening in Russia right now, I can't help but wonder if it isn't perhaps worth a look.

Late last week, for instance, a White House spokesman was quoted as saying: "I wouldn't, if I were you, invest in Russian equities right now." When I see someone in a position of authority telling everyone that something isn't an investment... well, that gets me really interested. So let's take a look at Russia as an investment play. And Michael: Let's get into your wheelhouse... technology.

So let me start by asking you a basic question: What's happening in Russia, and why is that scaring investors?

Michael: The media, of course, is focused on what's happening in Ukraine and the Crimea, which Russia just annexed. It's one of the most significant changes to Europe's political map since the fall of the old Soviet Union.

But the real threat of an ascendant Russia isn't just political - it's about the shifting balance of power with a nation that has vast deposits of oil and gas. The fear is that Russia could become so energy-dominant that it could dictate political decisions to the rest of Europe.

I don't think that's going to happen, but you'll notice that Germany's [Chancellor Angela] Merkel has had a thing or two to say lately about [Russian leader] Vladimir Putin. She has a good reason to be worried: Germany gets 35% of its oil and gas supplies from Russia.

Unfortunately for Russia, this development is obscuring the fact that the country is working double-time to transition from an economy based solely on energy to one that is also high-tech, particularly in areas related to computing, where Russia has traditionally lagged the West.

That's heady stuff, Michael. What has all of that done to the shares of Russian-based companies, and why?

Quite frankly, it's been a disaster. But savvy investors can profit from all that fear out there. Wall Street is worried because Russia is such a huge and powerful country. In particular, the Street is down on Russia right now. S&P just downgraded the nation, citing geopolitical risks and the fear of sanctions from the West.

As a result, Russian stocks have generally been getting hammered. To keep the data clean and discrete, I ran the charts over the last three months. In that period, energy giants Gazprom OAO (OTC: OGZPY) and CNOOC Ltd. (ADR) (NYSE: CEO) are both off more than 18%. The steel company Mechel OAO (ADR) (NYSE: MTL) is off 24%.

Let's turn specifically to tech... I've said many times that I consider you to be one of the very best tech-newsletter gurus in the market today. Tell us about Russia's tech sector. Is it vibrant? Are there areas of specialization? Is there a "Silicon Valley" equivalent, like you have here in the U.S. and in countries like Israel and India?

Great question. To understand what's happening with Russian tech today, you have to go back to the old Soviet Union in the Cold War. This is where I have an advantage over other tech analysts.

Fact is, I've been following this area for nearly 40 years. My Dad was the senior military editor at Aviation Week & Space Technology, and he covered the Soviet military and aerospace industry. It's a subject that he and I have been talking about since I was in high school.

The Soviets/Russians actually had some great science and technology in areas like missile warheads and rocket boosters, aerospace engineering, and the electromagnetic pulses that can knock out electronics.

And let's not forget that the U.S. space program right now relies heavily on Russian rocket booster tech - without which we would have no way to get our astronauts to the International Space Station (ISS).

As someone who grew up following the Apollo space program, I have to say that's pretty fascinating stuff, Michael.

It really is pretty amazing.

So what about Russia's tech sector?

Having said all that, there is no equivalent of Silicon Valley in Russia today, though the government is working to start one up. See, the old Soviet Union intentionally scattered their technology around the nation, putting them into nondescript "science cities" that literally were not on any map.

The scientists in those hamlets had little contact with the outside world. But they were motivated to make breakthroughs because they wanted to compete with the Americans - and they didn't want to get shot or go to a work camp.

But that would seem to leave Russia with a problem... in that there's no concentrated area that has the kind of high-tech "critical mass" that we enjoy here in the United States.

That's exactly right, Bill. But in the last decade or so, entrepreneurs have been ramping up. And the Russian government wants to invest hundreds of millions of dollars - if not much more - into that nation's version of Silicon Valley.

What companies are the actual tech leaders in Russia? And what businesses are they in?

Where the Russian tech industry is doing really well right now is in two broadly related areas - telecommunications and e-commerce.

Russia is like India and China in the sense that the masses are clamoring to join the Internet revolution. They want to get online with laptops and mobile devices.

Most investors don't know this, but roughly half of the 140 million citizens in Russia proper, so to speak, are now online - one of the highest percentages in that part of the world.

With that in mind, the four main Russian tech leaders investors should know about are:

  • VimpelCom Ltd. (ADR) (Nasdaq: VIP), a broad telecom play. The company provides both fixed and wireless web access, as well as mobile communications and services. The company has a number of subsidiaries that, taken together, have something like 215 million subscribers.
  • Mobile Telesystems OJSC (ADR) (NYSE: MBT), a straight-up mobile play that operates in the Russian Federation, Ukraine, Uzbekistan, Turkmenistan, and Armenia. Plus, it has a strategic relationship with one of Europe's major players, Vodafone Group Plc (ADR) (Nasdaq: VOD).
  • Qiwi PLC (Nasdaq: QIWI), a leader in electronic payments through kiosks, the web, and mobile platforms. It's Russia's version of PayPal - so we better not tell Carl Icahn... he might start a campaign to break up that company, too.
  • And Yandex NV (Nasdaq: YNDX), which is the "Google of Russia." Yandex operates the world's fourth-ranked search engine and enjoys a 60% market share in its home country. Google, with about a quarter of the market, is a very distant second there.

That's a great rundown on Russia's tech leaders. Are there any worth buying at this level? And why?

I like all four... for different reasons. But if I had to pick only one right now, I'd go with Yandex. The company has a wide range of hooks in the market for web services.

I've heard that Yandex is so ingrained in the tech realm there that folks will say "I'm going to Yandex this," where here in the U.S. we'd say "Let me Google this."

That's exactly right, Bill. And here's the thing: Like Google here in the U.S., Yandex in Russia has evolved into so much more than just a search venture. Yandex operates a news site, an e-mail and e-commerce portal, auction-based advertising sites - not to mention navigator services, maps, and location-based services for a wide range of mobile products.

This is an important company - not just in Russia's tech economy, but in that country's economy in general. It got its start in 1989-1990 as a search system for the former Soviet government.

In a classic example of market overreaction, we're looking at a stock that's fallen from its 52-week high of $45.52 (set back on Jan. 9). This is a great, great company. And this is our chance to own it - on the cheap.

You said that when we talked last week. So just how cheap is this stock?

To start with, at the current price of about $30 a share, you're looking at a company with a market value of only $10 billion...

Versus $400 billion for Google.

That's right, Bill. And that substantively lower market value is partly due to the fact that Yandex's shares are just so incredibly cheap. The shares are down 28% since the third week of January on a classic overreaction. Bill, the "PEG Ratio" on this stock is 0.83.

And as "fundamental" investors well know, anything under 1.0 is probably a stock you need to take a closer look at... as one that's in bargain territory.

Yes. I know you're more of a fundamental guy, while I'm more of a technician, but just to explain to folks... the "PEG Ratio" measures a stock's valuation as a percentage of its earnings growth rate.

Well said, Michael.

Anyway, you have a PEG of just 0.83. But look at some of the company's other numbers. It has a 32% operating margin, a 32% return on equity (ROE), and a recent quarterly earnings increase of 47%. Yandex has grown earnings per share by an average of 42% over the past three years.

That's smoking.

It really is...

Now, it's true that the company missed guidance recently, correct?

Yes, but analysts are somehow ignoring the fact that this company's financial performance has been extraordinary. Revenue grew to $1.21 billion from $947 million a year ago. And margins haven't really degraded from their three-year average. This company is a consistently strong performer. In tech, I love companies like that.

What about the threat of European sanctions? Can that crimp margins and dilute that performance?

While I know that's been a worry for investors, I just don't think it's an issue. Europe and the United States have both imposed punitive sanctions on Russia.

With more to come...

Right... but I don't see them as an issue. The sanctions so far have been largely aimed at travel and at freezing the assets of specific groups of officials in Russia and Ukraine. I don't think so.

Most of those actions are aimed at Russia's energy-sector players... but aren't expected to hurt the economy itself. If they don't, Yandex won't be hurt, either.

What kind of profit potential are we looking at?

I'm forecasting that this stock could double in less than three years. The EPS growth rate is just phenomenal. This stock is trading at a discount to its true long-term value. Folks are just plain freaked out by what they're reading in the news.

Look at it this way. If Yandex just got back to its Jan. 9 closing high of $44.22, we're talking about profit of 45%. And that still doesn't price in all the growth in e-commerce and web services in Russia and the surrounding nations.

What catalysts will we need to see to make that happen?

Good news, plain and simple. Professional investors are worried right now about the impact any sanctions would have just as Europe is starting to show more growth. Once we see what the U.S. and its allies intend to do - if anything - about Russia's annexation of Crimea, we'll have more clarity.

That's the first step. But patient investors who make savvy plays now and who are willing to get into this for the long run will look back on this as a classic Contrarian move that leaves them well-paid for their time and courage.

Any general predictions about Russia's tech sector?

I expect Russia to become a major tech force in the years ahead. It's got nearly seven decades of experience in sciences, engineering, advanced materials, aerospace, and the like. And it's seen its old ally China vault ahead, so there is that rich competitive spirit.

Up to now, Russia hasn't done as good a job of getting military technology out into the civilian population as the U.S. has. But that's changing. The web has opened up the country to broader outside forces that are reshaping Russian society.

Vladimir Putin may very well be one of the world's most controversial rulers. But not even he can put the genie back in the bottle.

Thanks, Michael

Source :

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in