Jim Rogers Is Buying Russia; Should You, Too?

NEW YORK (TheStreet) -- Famed investor Jimmy Rogers was on CNBC last week and when pressed, he said in his opinion Russia is currently the best investment opportunity he sees.

There are several individual stocks that trade as ADRs to choose from but anyone interested in following Rogers' advice might have an easier time choosing between the SPDR S&P Russia ETF ( RBL) or the iShares MSCI Russia Capped ETF ( ERUS).

For Rogers, this is part contrarian play because as he said everyone hates Russia. He also believes the country will turn around and President Vladimir Putin will not impede progress.

A more tangible catalyst is that Russia continues to play a huge role in the world's oil supply and demand equation, more on the supply side. Russia currently produces about 10 million barrels of oil per day out of 90 million produced globally and it also produces two billion cubic feet of natural gas daily. If demand for oil from emerging markets like China continues to increase then Russian companies should benefit.

The two funds are very similar. Energy is the largest sector by far in each fund at about 50%. Financials and materials also feature prominently with mid-teen weightings and telecom weighs in just under 10% of each fund.

The largest individual stock in the funds is Gazprom ( OGZPY) with high-to-mid-teen weightings in each. Gazprom is the Russian megacap, it produces gas and oil. With such a large weighting in each fund it is unlikely that the funds could do well if Gazprom was doing poorly. For this reason it is important to know at least a little about it and keep tabs on the company's fortunes.

The respective yields and expense ratios are similar. ERUS has a trailing yield of 2.1% and charges a 0.60% expense ratio compared to 2.4% and 0.59% for RBL. The biggest difference between the two is that ERUS has 28 holdings and RBL has 87. This means that ERUS has a much larger median market cap of $12.1 billion vs. $1.8 billion for RBL.

ERUS is the newer of the two funds and since its launch in late 2011 it has outperformed RBL by almost seven full percent. I believe the reason for the dispersion is attributable to the difference in market capitalization of the two funds.

This does not necessarily make ERUS a better fund however. If Rogers is correct about Russian markets doing well from here then it might make sense to favor the smaller cap-biased RBL because in many markets it is small cap companies that outperform early in a bull phase and RBL offers more exposure.

Because both funds have roughly 50% in energy they are both likely to be proxies for the energy sector as well as proxies for the Russian stock market. It is therefore important to consider the amount of energy these funds do have and how much exposure the rest of your portfolio already has to energy. If the price of oil and gas were to go down a lot then both ETFs should also be expected to go down a lot.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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