Monthly portfolio review – February 2016


In February the Russian stock market added about 3% in dollar terms. Ruble yield was the same due to the stable exchange rate of the ruble against the dollar over the month. The main reason for the increase was the rise in oil prices on expectations of an agreement between the world’s key oil producers to freeze production at current levels.

The best results in the past month has shown by Utilities — in the absence of significant fundamental drivers. Perhaps this was a result of the rotation of investors’ portfolios from E.ON Russia after the accident at Berezovskaya GRES into other sector names, which have low liquidity.

In addition it looks like investors once again drew attention to the sector whose value in the last few years has dropped by half over the past three years.

Portfolio performance

Portfolio in February, gained less than 2% is far behind the market for several reasons. First E.ON Russia shares have fallen this month by almost 20% after the accident at Berezovskaya GRES. Secondly, after the publication of weak sales data for January Magnit shares lost in value in February around 7%.

Finally my hedge against a falling market in the form of shares of Direxion Daily Russia Bear 3X brought a substantial loss. But because of its share in the portfolio was reduced significantly in January, the final impact on the result was not so big.

Bashneft became the best performer of the monthwith price growth about 30% (!). The main reason for the rally was the news about the privatization of state-owned shares — Russia owns 60% of the voting rights. The Government rely on the sale of a package with 20-30% premium to the market. The most likely contender for the asset – Lukoil.


Despite the rapid growth of Bashneft since the beginning of the year (+ 55%), I still think they are a good investment — stock traded with P/E multiple for 2016 at 6.0Х that is 30% lower than the average for Rosneft and Lukoil.

The whole portfolio is currently trading at a P/E multiplier of 8.5Х and 6.5Х for the current year and next year respectively.

I prefer to stick to the current portfolio structure, but am always looking for new ideas.

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