Right Investment Strategy Post Russia Ukraine War

Right Investment Strategy Post Russia Ukraine War.

With markets playing see-saw in the last month, the extensive discussion in my network is the 𝐫𝐢𝐠𝐡𝐭 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐟𝐨𝐫 𝐭𝐡𝐢𝐬 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧.

For instance, By market cap and importance, the largest companies in Russia are as follows:

LUKOIL is the largest Russian oil company,
Sberbank is Russia’s largest financial institution
Severstal is a global steel business headquartered in Russia and
Yandex is Russia’s largest technology company

All four companies have witnessed a steep decline in their stock prices in USD, with a couple already defaulting on their interest payments. To prevent further deterioration, the Russian government suspended trading.

A couple of my investor friends in the US wanted to invest in these Russian stocks as these companies are trading at rock bottom. Their rationale is that there is a slim chance these firms will shut down. However, in my view, this strategy might backfire.

Though these companies will operate, there is a 𝐡𝐢𝐠𝐡 𝐩𝐫𝐨𝐛𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐭𝐡𝐚𝐭 𝐭𝐡𝐞 𝐠𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 𝐰𝐢𝐥𝐥 𝐧𝐚𝐭𝐢𝐨𝐧𝐚𝐥𝐢𝐳𝐞 𝐭𝐡𝐞𝐬𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐫𝐞𝐧𝐝𝐞𝐫𝐢𝐧𝐠 𝐭𝐡𝐞𝐢𝐫 𝐞𝐱𝐢𝐬𝐭𝐢𝐧𝐠 𝐩𝐮𝐛𝐥𝐢𝐜 𝐞𝐪𝐮𝐢𝐭𝐲 𝐰𝐨𝐫𝐭𝐡𝐥𝐞𝐬𝐬.

Rather than make broad sector/geographic bets or attempt a #contrarian strategy, I suggest 𝐦𝐚𝐤𝐢𝐧𝐠 𝐦𝐨𝐫𝐞 𝐟𝐨𝐜𝐮𝐬𝐞𝐝 𝐛𝐞𝐭𝐬 𝐨𝐧 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬.

Concerning Indian stock markets, I am taking a bet on the following set of companies:

𝐓𝐞𝐜𝐡𝐧𝐨𝐥𝐨𝐠𝐲 𝐒𝐞𝐜𝐭𝐨𝐫: Matured Indian IT services and mid-cap firms have done well as markets perceive them as growth companies due to the digital revolution. However, platform companies like Zomato and Paytm have crashed due to 𝐮𝐧𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐢𝐞𝐬 𝐚𝐫𝐨𝐮𝐧𝐝 𝐢𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐞𝐜𝐨𝐧𝐨𝐦𝐲. So 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐢𝐧 𝐭𝐡𝐞𝐬𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐢𝐬 𝐚 𝐛𝐞𝐭 𝐲𝐨𝐮 𝐚𝐫𝐞 𝐭𝐚𝐤𝐢𝐧𝐠 𝐨𝐧 𝐭𝐡𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐚𝐧𝐝 𝐚 𝐛𝐮𝐥𝐥𝐢𝐬𝐡 𝐞𝐜𝐨𝐧𝐨𝐦𝐲.

𝐎𝐭𝐡𝐞𝐫 𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐢𝐞𝐬: Firms with 𝐡𝐢𝐠𝐡 𝐩𝐫𝐢𝐜𝐢𝐧𝐠 𝐩𝐨𝐰𝐞𝐫 𝐭𝐡𝐚𝐭 𝐜𝐚𝐧 𝐩𝐚𝐬𝐬 𝐡𝐢𝐠𝐡𝐞𝐫 𝐢𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐬𝐭𝐬 𝐭𝐨 𝐭𝐡𝐞 𝐜𝐮𝐬𝐭𝐨𝐦𝐞𝐫𝐬 should do well. Thus, 𝐛𝐫𝐚𝐧𝐝𝐞𝐝 𝐜𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬, 𝐟𝐨𝐨𝐝 𝐩𝐫𝐨𝐜𝐞𝐬𝐬𝐢𝐧𝐠, 𝐚𝐧𝐝 𝐩𝐡𝐚𝐫𝐦𝐚 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 can perform well.