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A Russian, State-Owned Energy Company

Chris Preston

Harvey Sawikin of Firebird Management gave the Value Investing audience his take on a company from another emerging market, Russia.

The company is Gazprom Neft (OTC: GZPFY).

Gazprom Neft is a Russian shale oil company. Lack of liquidity – why it’s cheap. Less than .025% in daily trading.

There's a misconception on Russian oil companies, Sawikin says: that they can’t make money. They do – and a lot of it.

Gazprom Neft is trading at just 4 times earnings, and features an estimated dividend yield of 7.9%.

One reason the stock is cheap is because it suddenly plunged earlier this year. The reason was because Wisdom Tree decided to exclude the stock from its Equity Index Fund. It has since bounced back and is trading at a share price of roughly $22 U.S. dollars – though still only four times earnings.

Russia, as a whole, is cheap. Among emerging markets, it has the lowest PE of 4.9. By comparison, Indian stocks are trading at 14.4 times forward earnings, Brazil 11.1, China 9.5 and Mexico 16.9. That makes the country’s stocks attractive, and many of them potential bargains.

Furthermore, Russia’s population is growing rapidly in recent years, and GDP has doubled since 1998. It also has the second largest foreign currency reserves after China.

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