5 Russia World Cup Stocks Poised to Score
WINDERMERE, Florida (Stockpickr) -- The 2018 World Cup has been awarded to Russia, a massive country with limited infrastructure, horrible transportation and inadequate stadiums.
This decision came as a shock too many soccer enthusiasts since England was largely believed to be in the lead to get the 2018 games. FIFA, soccer's governing body, also awarded the 2022 World Cup to Qatar, another surprise because many thought the U.S. was the frontrunner to get those games.
Following the great news, and Russia's announcement that it plans to spend $10 billion to modernize the country for the games, the country's largest steelmaker,
OAO Severstal
, saw its bonds rally the most in five months. Russia said it plans to spend big money on such things as renovating 16 stadiums, building new hotels and roads and upgrading most airports so they're fit to handle the enormous amount of soccer fans that will flock to see the games.
Being awarded the World Cup games is a big deal for any country, but it's especially a big deal for
countries such as Russia and Qatar. Recently, South African Finance Minister Gordhan Pravin said that the World Cup was responsible for half a percentage point of gross domestic product growth in his country. Half a percentage point of GDP growth is nothing to sneeze at in a world full of sovereign debt issues and slowing economic growth in so many major economies.
The World Cup coming to Russia should provide a major boost to Russian equities tied to job growth and infrastructure spending. It should also help to attract more direct foreign investment and hot emerging-markets money that will drive the entire Russian stock market higher. Russia is going to become the must-have emerging-markets investment that investors will buy now, way ahead of the games, to get exposure.
Here's a look at
Russia-related stocks that should benefit big going into the 2018 World Cup
.
It's not always easy to find pure Russian plays in the U.S. stock market, but there are a number of names that should work fabulously for plays on the coming 2018 World Cup. The first and easiest way to play Russia for a U.S. investor is to buy the
Market Vector Russia ETF Trust
(RSX) - Get Report
.
This ETF will give you broad exposure to the entire Russian stock market, which I expect will rip higher as the hot money flows to the East. The RSX is heavily weighted in three sectors that should benefit greatly from the World Cup spending: financials at 13%, energy at 40% and industrial materials at 24%. What's even better about this ETF is that it's already showing strength, with shares trading near a
.
Plus, the RSX just formed a
after the stock traded above some previous overhead resistance at around $36.40 a share. This could mean that the RSX is ready to enter a new technical bull phase that could send the significantly higher.
The next two major overhead resistance levels will come into play on the RSX at $37 and $40.65 a share. If those levels get taken out to the upside, then look for this Russian play to head back towards its three-year highs of just under $60 a share.
Another great Russia-based stock play for the coming World Cup games is
Mechel OAO
(MTL) - Get Report
, an integrated mining, steel, ferroalloys and power company.
Mechel is the perfect Russian ADR play for increased infrastructure spending. Orders and business should go through the roof and soon as the Russian government kicks off all of its programs to revitalize the country ahead of the 2018 games. As I stated earlier, Russia plans to spend $10 billion on infrastructure, and I am sure that number will go up as costs overrun as they always do for such big world stage events.
From a technical standpoint, Mechel is breaking out right now on huge volume. The stock has started to clear some overhead resistance at $26.20, and the volume patterns look strong. The last five trading sessions have seen volume come in well above the three-month average trading volume of around 2.1 million shares. This stock is on a collision course, with its next resistance level of around $32 a share.
Two more fantastic ways to play the World Cup in Russia are with Russian telecommunications ADR stocks
Mobile TeleSystems
(MBT) - Get Report
and
Vimpel-Communications
(VIP)
. All of the infrastructure spending that's going to occur in Russia will create a ton of new jobs as construction and materials companies hire to meet the coming demand. All of this new job creation will lead to a trickle-down affect of
. Consumers with well-paying jobs created by the infrastructure ramp-up will need new cell phones and telecommunications services.
This is where Mobile TeleSystems, a telecommunications provider in Russia, and Vimpel Communications, a Russian telecommunications operator that provides voice and data services for wireless, fixed and broadband technologies, come in.
The technical picture for MBT needs to shape up a bit before the stock will look more attractive. I would advise waiting for the stock to break above the 50-day moving average of $21.95 a share. Once that happens, the stock will demonstrate some near-term buying momentum, so you could buy. However, the big move on this name won't come until the stock takes out some massive overhead resistance at around $23.50 a share. If that happens, fasten your seatbelts, because I believe that will be the confirmation of a new bull run.
As for Vimpel-Communications, I would look to buy this stock near the 50-day moving average of $14.75 a share, but confirmation of the next move higher won't come until VIP trades above some overhead resistance at around $15.90 a share. A move above that level should set up a run toward $17 to $19 a share in the near future.
Another awesome World Cup Russia-based play is
CTC Media
(CTCM)
, which operates three Russian television networks. Again, this is another consumer play that should benefit from the coming job growth in Russia.
It's too early to know if this company will win the rights to broadcast the games locally, but if it does, that will be a huge catalyst for the stock. I would expect local Russian companies to ramp up ad spending on TV networks to pitch their products and services to what will be a growing job market in the near future.
CTC Media has a strong balance sheet, with $146 million in cash and no debt. The stock trades at forward price-to-earnings of 19 and has a market cap of only $3.86 billion. I expect to see this market cap expand rapidly in the coming years as growth picks up in Russia due to the successful World Cup bid. The velocity of money has a wonderful way of working itself throughout the economy once spending starts in one sector, as it will in Russia with construction and infrastructure.
From a technical standpoint, watch for shares of CTCM to break out above some previous overhead resistance at around $24.70 a share. A move and close above that level should be the confirmation you need that the bulls are about to get serious with this stock. The all-time high on this stock is just above $30 a share. My take is that this stock will easily take that historic high out very soon.
What's great about all of these Russian plays is that it's still very early to buy into these names and ride the trend higher. The year 2018 is a ways away, so take advantage of this news and buy into the country so you can capture the big gains before all the big boys jump on board.
To see more Russia-based stock plays on the 2018 World Cup, check out the
portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.