Things are not all well with Russian equities. The S&P Russia Broad Market Index has lost more than half its value in U.S. dollar terms since the summer. There is figurative blood on the streets. If we were to follow the example of the founding members of the Rothschild banking dynasty, we would be lending money to Russian companies and buying up their shares.
The case for investing in Russia now is certainly thought-provoking. At current prices, the Russian BMI is trading on a trailing price/earnings multiple of around four; the comparable ratio for the Global BMI is closer to twenty. At roughly 58%, Russian equity volatility is in the 87th percentile of historical readings since 1997 and, to borrow a perspective from our recent whitepaper, periods of high volatility have historically identified beneficial entry points for Russian equities, as the chart shows:
Source: S&P Dow Jones Indices LLC as of December 17th, 2014. Charts and tables are provided for illustrative purposes. Past performance is no guarantee of future results.
So is Russia a “buy”?