I often talk about how it’s not necessarily the direction, but it’s the speed and magnitude of the moves that matter in currencies (and Treasuries). This collapse in the $EURUSD since late October is stunning.
The U.S. dollar is seeing the second fastest 6-month rise in 40 years. http://t.co/GoJPfWXRkH
The #CurrencyWars I write about all the time as potential #BlackSwan catalysts are increasingly looking looking like potential #BlackSwan catalysts sooner rather than later. Nothing to panic over yet, but be careful and move slow. Nothing wrong with being patient.
Meanwhile, this relentless march higher in the value of the US Dollar is exacerbating the pain in the energy/oil sector. Here’s another chart that shows a high correlation in the oil move with that of the US Dollar.
If there is a single stock that’s been crushed by the energy/oil crash that I am interested in buying its….wait for it…$YNDX, the Russian Internet company. Yandex is down huge over the last six months along with the price of oil. I can’t get over the correlation between $YNDX and $OIL‘s stock charts over the last six months as energy/oil crashed.
I’ve repeatedly explained why we, as Revolution Investors LINK, don’t have to try to time a cyclical bottom in energy stocks during this collapse LINK. Our only energy sector, First Solar, LINK is up double digits over the last six months. Part of the reason I’ve stayed far away from energy and oil stocks is that these cycles can take years to play out and it could quite possibly be a decade or longer before oil sees $120 a barrel again. LINK Can Yandex, the Russian Internet company, bounce without oil/Russia recovering?
Obviously there are some serious currency problems with Yandex being a company that depends on at least some relative value in the Russian Ruple to make money. And there are plenty of reasons to be concerned that Yandex and other Russian companies will some day be subject to sanctions though that is probably the least of the worries facing Yandex shareholders in the US. It’s reasons like these that keep me mostly invested in US-based companies rather than taking on the additional risk of investing in an overseas company.
All that said, I’d much rather bet on $YNDX bouncing after being crushed by the collapse of energy/oil than on any actual energy/oil stock that’s likewise been crushed by the collapse of energy/oil.
Not many, if any, energy/oil companies are going to report topline growth this year. Yandex is likely to grow its topline 20-30% this year as it has been for several years, as you can see if you dig down into the actual numbers. Yandex has grown their revenue, in US dollars, to more than $1.3 billion in 2014 and that revenue number is growing about 20-30% per year. With a current market cap measured in US dollars of $4.5 billion, this high growth stock is trading at 3 times sales vs similar growth Internet stocks (not based in Russia) trading at 10-15 times sales.
I personally don’t own any Yandex yet. But I’m getting close to risking some of my money on it on a trade that I’d probably be looking to hold for a year or two, betting that the stock will go much higher if Russia and energy/oil just even stabilize from these current levels.