Published:
December 28, 2007
The
correct answer is
(C.) Gazprom
Far and away Russia's largest
company, Gazprom owns more than 60%
of Russia's known natural gas
reserves, equivalent to nearly
one-fifth of global reserves.
Gazprom is in an enviable position
because its main competitive
advantage--strong government
support (and the Russian state owns
a large stake)--means it's treated almost
like a national champion.
As such, Gazprom has preferential
access to major new gas projects in
Russia. This is icing on the cake
considering that it is also a major
gas supplier to Europe, where some
countries depend on Russian gas for
as much as 90% of their supplies.
And increasingly, Gazprom is selling
gas to energy-hungry markets in
Asia.
Gazprom is smack-dab in the middle
of the exploding Russian energy
market. In addition to its natural
gas reserves, Russia also has nearly
twice the oil reserves of Qatar and
Iran, the countries with the second
and third-largest gas reserves,
respectively. The country also has
the fifth-largest oil reserves in
the world, and was the world's
second-largest oil producer in 2007,
second only to Saudi Arabia.
Gazprom is clearly an excellent play
on Russia's energy market; but it's
also an excellent play on the
Russian economy in general. After
all, Russia's transition from
communism to free-market capitalism
and democracy wasn't easy or
painless (especially in 1998, when
the Russian government defaulted on
its domestic debts and allowed the
nation's currency, the ruble, to
float freely), but today Russia is
enjoying a financial boom. The most
obvious reflection is its stock
market's meteoric rise since 2000, a
lower inflation and tax rates, and
strong GDP growth. And despite
having tax rates that are among the
lowest in the world, the Russian
government's tax collection on oil
and gas sales make Gazprom a major
contributor to the health of the
Russian economy.
Gazprom notwithstanding, the Russian
economy looks far more sustainable
today than it did a decade ago, and
Paul Tracy, Chief Investment
Strategist for StreetAuthority.com
and editor of the
Market Advisor
newsletter, believes Russia's
economic growth will power strong
returns for investors in coming
years. Most American investors have
two primary ways to profit from the
surging Russian economy: closed-end
funds with exposure to Russia and
American Depository Receipts (ADRs)
of Russian companies trading on the
major U.S. exchanges. In the latest
issue of
Market Advisor, Paul
offers a rundown of some of the most
promising ADRs and closed-end funds
with meaningful exposure to the
Russian market, including several
that boast long-term growth rates
well over 20%! To learn the names of
these stocks and funds, and to learn
more about the
Market Advisor
newsletter, please
visit this link.
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