War Damage in Ukraine. Ales Ustinau/Pexels.

Buying When There's Blood In The Streets

A couple of days after Russia's invasion of Ukraine, putting into practice the famous Baron Rothschild aphorism, I noted in a post here ("Russia's Invasion of Ukraine: RIsks and Opportunities")  that I had purchased shares of a couple of Russian companies: Yandex, N.V. (YNDX)* and the American Depository Receipts (ADRs) for the Public Joint Stock Company Gazprom (OGZPY):

In our personal account, we bought shares of two of them on Thursday and Friday: Yandex (YNDX) and Gazprom (OGZPY). Just to clarify: neither of those stocks were Portfolio Armor picks.

The next week, I mentioned on my personal Twitter account that I had purchased some of the ADRs of Sberbank of Russia (SBRCY). 

Just put in a limit order for Sberbank. It's trading at 0.45x book value and has a forward dividend yield of over 100%. This is basically a bet on sanctions getting ratcheted down from DefCon1 before Russia retaliates with some Samson Option moves of its own.

— David Pinsen (@dpinsen) March 3, 2022

Those were all effectively blue chips: Yandex is sort of Russia's version of Google; Gazprom is its state-owned gas giant that delivers natural gas to the EU via pipelines, and Sberbank is the oldest and largest bank in Russia. In this post, I'll update how that's worked out so far. First, a quick update on yesterday's post, about other war-related trades. 
 

Also In March: Long Oil & Gas, Short Treasuries

In my post yesterday (Another Casualty of The Economic War), I mentioned Portfolio Armor was bearish on U.S. Treasury Bonds in March and bullish on oil and gas. 

Up since March: oil & gas, Russia’s current account surplus. 🇷🇺 🇺🇦

Down since March: U.S. Treasury bonds $GUSH $USO $UGA $TBT https://t.co/FlWIRCBN1c

— Portfolio Armor (@PortfolioArmor) June 7, 2022

In that post, I wrote that our bearish bet on Treasury Bonds, the ProShares UltraShort 20+ Year Treasury ETF (TBT) had climbed 29.41% since it hit our top names in March:

Flash forward to this week, and here's how TBT (and our other top names from mid-March) have done so far since then. 

Four of our top ten names from mid-March are up double digits so far, and they're all plays on blowback from our economic sanctions on Russia: our bet against Treasuries, TBT, plus three bets on oil & gas: Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH), United States Gasoline Fund, LP (UGA), and United States Oil, LP (USO). Overall, our top ten names from March 14th are up 15.72% so far, on average, versus -0.95% for the SPDR S&P 500 Trust (SPY). 

A quick update: Treasuries caught a bid on Tuesday, and as a result, TBT dropped 2%. So, as of Tuesday's close, it was up 26.8% since it hit our top names in mid-March.

Now to the Russian stocks update. 
 

Pros: Gains: Cons: You Can't Realize Them 

Yandex, Gazprom, and Sberbank all stopped trading in the U.S. in early March. The Moscow Stock Exchange was closed then too but reopened at the end of March. Each of these stocks trades there. Here's how they were doing as of Tuesday's close. 

• Yandex: this closed at 1,497 rubles, or $24.34 per share. This one's actually down significantly in ruble terms from when I bought it, but thanks to the ruble spiking versus the dollar, it's up 6.6% from my cost basis of $22.82 per share. It's not trading outside of Russia though. 
• Sberbank. 118.32 rubles yesterday. Each ADR represents 4 Russian shares, so this was worth $7.67 per ADR. My cost basis was $0.66 per ADR, so this one's up 1,062%. The ADR is no longer trading, and Russia is not allowing it to be renewed, so JPMorgan, the administrator of the ADR is winding it down. I'm exchanging my ADR for Russian shares, which I also will not be able to sell (Russia isn't letting foreigners sell shares now). 
• Gazprom: 297.99 rubles yesterday. Each ADR represents 2 Russian shares, so this was worth $9.65 per ADR. My cost basis was $4, so it's up 141% since early March. This ADR will be wound down too, in August, so it will be the same deal as Sberbank likely. 

So, in a nutshell: one of these is roughly flat, one's a ten-bagger, and the other's more than a double, but they're all basically frozen until after the war is over, presumably, and relations eventually thaw between Russia and the U.S. 

*To be precise, Yandex is domiciled in The Netherlands, but nearly all of its revenue is generated in Russia.