The world feels beset on all sides. An oil spill is reaching crisis stage in the Gulf of Mexico. Polar ice is melting, driven by global climate change. European credit markets seem to melt down further daily.
Nowhere feels safe.
So rather than hiding under the bed covers and waiting for the trauma to end, consider using these fraught times as an opportunity to invest in some risky places. There are Russian companies that stand to benefit from all of these scary situations.
The least-regarded of the BRIC quad of emerging markets (also including Brazil, India and China), Russian investments might not feel like a comfortable place to put your money, but then again, does anywhere?
“Russia simply continues to be a precarious place, both economically and politically,” Morningstar Inc. analyst Ryan Leggio wrote in a note analyzing mutual fund ING Russian on March 22.
But ING Russia has returned an annualized 21.5 percent for the past 10 years, according to Gregg Wolper, a Morningstar senior mutual fund analyst in a June 1 article. (If you invest in ING, hold on! In two of those ten years the fund has plunged more than 70 percent.)
If you are going to be afraid either way, see whether any of these investments help you at least have a chance to profit from that fear.
Global warming: Shipping and agriculture
JSC Primorsk Shipping Corp., Russia’s biggest petroleum shipper, transports oil through the Baltic Sea and Russia’s Arctic region, specializing in transport over ice-covered and rough seas, according to the company.
Murmansk Shipping Company JSC – is a bulk carrier specializing in Arctic and North Sea routes. Analysts with Finam Investment Company, Russia’s largest brokerage, expect Mirmansk to benefit from rebounding shipping contracts with an impending Russian economic recovery. Finam also expects Mirmansk to benefit from relationships the company has with northern Russian mining interests as mining activity in the country’s far north picks up, according to a February research note.
OAO Uralkali, Russia’s largest manufacturer of potassium fertilizer, stands to gain from higher prices on increasing global demand for fertilizer, at the same time that the company could benefit from a rumored takeover, wrote Constantin Yuminov, a chemical company analyst for Rye, Man & Gore Securities, in a research note this week.
Black Earth Farming LTD, with market capitalization over $1 billion, buys and develops agricultural assets, a.k.a farms. Based in Jersey, United Kingdom, the company is named for a fertile region in western Russia where the company operates farms. Russia’s agricultural sector fell apart with the fall of communism but is finding its feet again with the help of government subsidies, tax breaks and foreign investment. Black Earth Farming has announced its intention to expand by continuing to buy up land.
William R. Cline, a senior fellow at the Peterson Institute for International Economics estimates in a 2007 study that countries closest to the equator will suffer the most from heating associated with global climate change. This could lead to increased global demand for Russian crops. By some models, Russian agriculture won’t be harmed at all by climate change. Even models that do predict harm put Russia among the countries least harmed by a warmer planet.
Oil supply fears:
Peak oil is bullish for oil and gas investors. Rising petroleum prices that threaten household fuel budgets serve mainly to boost investment accounts. So Russian oil and gas companies, which account for the country’s largest share of export earnings, stand to benefit from protracted supply disruptions elsewhere.
OAO Gasprom, the world’s largest gas producer, has strong government support and the outlook for rising gas prices on growing demand for the foreseeable future lead Rye, Man & Gor Securities to recommend buying shares.
OAO Lukoil, the country’s second-largest oil producer was the top pick of Sergei Perminov, an analyst for Rye, Man & Gor Securities for its strong petroleum exports, strong corporate governance and low debt, according to a research note. The company could gain from increased production from the Korchagin oil field and the potential for an export tax break, according to RMG.