Does Tesla Employ a Classic Dumping Strategy?

Dear Reader,

Tesla has raised prices for its electric vehicles for the third time in 2 months.

It seems Tesla is employing the classic dumping strategy of first selling goods, in this case electric vehicles, for below production cost to win market share and push out the competition, which in this case did not exist. Once competitors are driven out of business, the classic dumping strategy bestows raising prices and achieving exorbitant monopolistic profits.

This seems to have been Tesla's plan all along. Tesla has bet that a new market for electric vehicles would develop, which was proven correct. Tesla seems to have been aware that producing electric cars due to the high usage of ferrous metals used is prohibitively expensive, even with government subsidies. Fully aware of the aforementioned fact, Tesla seems to have planned all along to develop and conquer the new electric automotive market and later once an established leader in a large enough market, Tesla has planned to raise prices.

This is the classic dumping strategy described in marketing books.

Will it work? I doubt it. Producing cars is characterized by very low profit margins. The main business of the market leader Volkswagen, outside its luxury brand Audi, has a net profit margin of around 4 %. The luxury sedan makers like Audi, BMW and Daimler, the maker of Mercedes, have net profit margins of 6.5 % on average. Why can't these leading automobile manufacturers raise just their prices to gain higher profits? Because the demand for cars is elastic. That is, a large increase in price will lead to an even larger decrease in sold quantity. An economics 1.01 concept. The majority of people all over the world are just not so well off to purchase a car for a price much above 35 000 USD. This is also because cars entail other additional costs like filling up gas, repairs, insurance etc. That is why, people with family and children prefer low priced vehicles, that economize on gas usage.

Tesla seems to think it can raise prices without hurting demand for its vehicles proportionately more. Tesla is obviously counting on its brand equity or with other words that its brand can compare with brands like Porsche and Maserati on the lower end and Aston Martin , Jaguar, Bentley, Ferrari and even Lamborghini at the higher end of luxurious sports brand cars.

Whether Tesla's assumption will be proven right, only time will tell. I personally think that Tesla's brand speaks for innovation and luxury, but not so much for sports luxury so as to compare with Bentley or Ferrari. What is more, in terms of design Porsche, Bentley, Ferrari and Lamborghini seem to be ahead of Tesla.

At the current valuation of 593. 871 billion USD Tesla seems way overvalued compared to the market leaders of Volkswagen and Toyota.

Even if Tesla succeeds in moderately raising prices without hurting disproportionately demands for its electric vehicles, Tesla is likely to sustainably achieve only small net profit margins in the long run with which it will be difficult to substantiate its current valuation. And this is only after Tesla's stock price fell with circa 30 % from its recent highs.

I estimate Tesla is worth not more that 150 billion USD in the long run and this is in case the company succeeds in making sustainably positive net profit margins, which has proven elusive for the company in the past, except for 2020. However, the 2020 was achieved with government subsidies and booking revenues in advance. 

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Square's Future. A Valuation in Addition.

Dear Reader,

Square Inc, the financial services, merchant payments aggregator and mobile payments company, is currently valued at 93.651 bln. USD.

Actually, based on Square's future development opportunities I would say Square is undervalued. At Price/Earnings ratio of 468 the company is with a lofty valuation metric, though. At least at first glance.

That said, Square could prove the Amazon of payments. For the 2017, 2018 and 2019 calendar years Square grew its revenue by close to 40 % a year and the 2020 calendar year was the company's biggest ever recording 101.50 % revenue growth year on year.

Customers seem to be embracing Square's financial services, point of sales and business loans products. The company facilitates payments by saving people time, effort and money, which are the prerequisites of a great selling product.

Square's products automate payments, facilitate the usage of credit cards and loan businesses much needed turnover money. Artificial intelligence is driving the fourth industrial revolution which is transforming our world at present. Automation algorithms are entering every area of our lives. And few areas are more important than financial services. By providing artificial intelligence algorithms to process payments Square is at the edge of the artificial intelligence revolution in payments.

I forecast Square could end up being for finance close to what Amazon is for internet merchandizing. Square has able management at the helm with Jack Dorsey, a cutting edge product and reasonable pricing for its products. What is more, Square's advanced technology provides it essentially with a first mover advantage which makes the company very difficult to dislodge.

I believe Square could reach a valuation of around 370 billion USD in 5 to 7 years or approximately 4 times its current valuation.

The artificial intelligence revolution coupled with Square's payments infrastructure solutions seem to provide a bright future for the company

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Bitcoin Future

Dear Reader,

Bitcoin is currently developing as a means of exchange, unit of account and a store of value or the definition of money.

If not banned by governments, Bitcoin is well on the path of becoming at least a way to transfer wealth. Many crypto tokens, which are basically cryptocurrencies issued in connection with a company's project have risen in value multiple times and have proven as an excellent way to increase wealth.

Bitcoin is actually somewhat of an infrastructure for cryptocurrencies. Bitcoin was the first and remains the most popular cryptocurrency. Other crypto tokens, however, have proven as an excellent way to raise capital for companies that were considered risky even for venture capital funds. All this new money raised via crypto tokens contributed to developing  the global information technology start up system. Yes, cryptocurrencies, especially tokens, are very similar to stocks in the sense their future value depends on the fortunes of the particular company that has issued them. Bitcoin, Ethereum and other cryptocurrencies, however, serve as financial and payments infrastructure which could prove much more valuable in the long term than their ability to raise capital. Finance is changing, along with it its infrastructure. Some analysts think Bitcoin is USD 2.0 or a new global currency, independent of government interference, owned and developed by its users. If Bitcoin's volatility is stymied, Bitcoin and its other derivative cryptocurrencies could better serve as store of wealth or with other words money.

In any way, if  Bitcoin keeps itself from government interference, Bitcoin could well be the future of our present day financial system as we know it.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Twitter Future Prospects

Dear Reader,

Twitter is currently valued at 52.86 billion USD by public markets.

For the last 5 calendar years the company grew its revenue by 50 % which, although not small increase, is dwarfed by the growth of other popular technology companies. Even technology companies with very large market capitalizations like Alphabet, Google search engine owner, and Facebook exhibited larger revenue increases in the last 5 calendar years.

Twitter has become something like a technology value company. Twitter is very popular in Europe, relatively more than the popularity of Facebook and Snap Inc, Snapchat's owner, for example. 

I think Twitter's future lies in news content. Twitter is the leading social network to stay up to date with the most current news flow. Virtually all journalists, both leading and less prominent, all over the world are on Twitter and are utilizing Twitter as their main social network.

Twitter is trying to develop the platform with longer text publications limits and video emphasis.

What is more, according to various leading technology sites, Twitter is working on a subscription feature.

Yes, news is valuable, so Twitter potentially providing paid exclusive content could increase revenue.

I believe Twitter should put more emphasis on news and video content to increase its value in the future.

Some of the world's leading news are first broken on Twitter. The value of this feature remains only partially unlocked.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Google in Comparison with Baidu and Yandex. The Next Search Engine

Dear Reader,

Google, the infamous search engine now part of the company Alphabet Inc, has two credible global competitors - the Chinese search engine Baidu and the Russian search engine Yandex.

Google accounts for around 120 billion USD from Alphabet Inc's 182.5 billion USD in 2020 full year revenues.

Yandex and Baidu have around 3 billion USD and 16 billion USD revenues annually respectively.

The problem with Yandex and Baidu is that they are mainly local search engines for Russia, Eastern Europe, former CIS, and China. Google is banned in China.

Actually Yandex has more relative revenue than Baidu from what could be explained from their respective market sizes. Yes, Google is the dominant search engine globally and the huge amounts of data it gets on a daily basis helps it maintain its edge. Russia and China, have enormous human potential with highly educated workforce, especially in Russia, and educated strength in numbers in China which could always produce brilliant scientists and technologists.

The larger US internal market helps Google make vast amounts of revenue. For a search engine to dislodge Google it has to really prove its algorithms produce much more relevant, semantic search based results. China is a leader in artificial intelligence, with Russia also gaining speed. Algorithms powered by artificial intelligence would power the next generation search engine which would better classify information.

That said, competing with Google is extremely difficult, as many search engine startups have found. Google has a first mover advantage, a huge database with user's preferences on which it could train its artificial intelligence algorithms and exceptional customer loyalty. A credible competitor has to  provide a really unique and genius text analysis algorithm to be able to dislodge Google.

Yes, Russia and China have a good chance of doing that.

However, I think Google's main competitor is someone in a garage thinking how to change the world.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Bitcoin and Cryptocurrencies as Alternative to Stocks Investing

Dear Reader,

Is Bitcoin and cryptocurrencies investing an alternative to investing in stocks of listed companies?

The short answer, as far as I am concerned, is no. Bitcoin and cryptocurrencies are currently and potentially much more volatile than company stocks. Bitcoin's volatility is similar to the volatility of micro capitalization stocks or companies with stock market capitalization of between 50 million USD and 300 million USD.

What is more, Bitcoin and cryptocurrencies are not shares of a company, unlike stocks. Which means Bitcoin and cryptocurrencies do not participate in the estate of the company and are not entitled to a share of the proceeds if company's assets are liquidated in case of bankruptcy.

What is more, Bitcoin and cryptocurrencies do not have inherent cash flows which translate usually into net profits to back them, different to stocks of companies which are legal entities.

The US Securities and Exchange Commission interprets Bitcoin and cryptocurrencies as commodities. 

Bitcoin and cryptocurrencies usually serve as a payments infrastructure or tokens coupled with a particular projects of a company. In that way they are driven by most of the factors that drive stocks.

However, the aforementioned differences do create higher inherent risks in investing in Bitcoin and cryptocurrencies than investing in company stocks.

In short, investing in Bitcoin and cryptocurrencies entails much higher risks than investing in the stocks of listed companies.

The rewards, however, especially from investing in relatively obscure cryptocurrencies can be potentially much greater.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Facebook and Its Future. Diem Cryptocurrency

Dear Reader,

Facebook is the dominant social network globally. Facebook is described as a technology conglomerate.

Actually the main business of the company is its social networking site www.facebook.com and lately its Instagram property which is now the main growth engine of Facebook Inc. WhatsApp and Messenger have also more than 1 billion monthly active users.

However, the social networking part of Facebook is reaching the limits of its explosive growth lately. Yes, the revenue of Facebook Inc. grew 21.60 % year on year in 2020. However, the monthly average users numbers are not growing so fast simply because on aggregate Facebook Inc's online properties have around 3 billion users globally and the world's population is 7.8 billion. Yes, China has banned Facebook and China has a population of 1.4 billion, but China's equivalents of Facebook like Tencent and Weibo are now deeply entrenched and dominant there.

Facebook is actually looking to develop itself along the lines of its China competitors. That is, use its user base to create a super application that integrates social networking, video, online shopping and even digital currencies. In fact, I think videos, online shopping and digital currencies are very promising verticals for Facebook to grow. Amazon is the dominant force in online merchandising and YouTube in videos, however.


In Bitcoin, cryptocurrencies and payments Facebook is a pioneer. The banking and the connected payments business is a multi trillion USD per year in revenues business globally. Facebook has first mover advantage in cryptocurrencies. Diem, formerly known as Libra, is a new payments system and possibly a cryptocurrency developed by Facebook. Diem, initially branded as Libra, encountered resistance from regulators and it had to reformulate its proposition. But Facebook has huge resources, both financial and in terms of programmers. Coupled with the vision of Facebook's founder Mark Zuckerberg Diem is a formidable proposition.

Diem first was to be backed by a basket of fiat currencies, but now reportedly it is to be backed only by the USD. Bitcoin and cryptocurrencies are the future of the global payments system or the future of our world. Cryptocurrencies save effort, time and money for people. For now the price volatility of cryptocurrencies prevents them from becoming a fully fledged means of exchange. Backing Diem or other crypto with the USD or other leading currencies, however, could solve that problem.

Mark Zuckerberg's vision, Facebook Inc's resources, the first mover advantage and its the user base could turn Diem and crypto into the future major growth engine of Facebook. 

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Apple and Its Cloud Services Business

 

Dear Reader,

Apple achieved 53.77 billion USD in revenue from its services business in the 12 months ending on 26 September 2020 out of 274.5 billion total revenue.

Actually, Apple's services business is the cloud services business of the company. Because the applications and music are stored in the cloud. Many Wall Street analysts propose that Apple uses its services business to keep users attached to its hardware sales from which it got 220.75 billion in revenue in the 12 months ending on 26 September 2020. 

Yes, I think there is some validity to that argument. Apple's services, however, is a now very large business on its own. Apple's App Store acts as a platform for developers to post their applications and collect revenue from them. Basically, Apple is mustering the global technology talent on its platform to create tailor made application that entertain and increase productivity.

Apple is currently valued at 2.04 trillion USD by public markets. I estimate in 7 years Apple's intrinsic worth can actually reach that. Currently, I think Apple is worth around 1.4 trillion USD.

Leading central and commercial banks have created trillions of paper money which are chasing small number of sound investment opportunities which lead to technology stocks, bonds and real estate globally being grossly overvalued.

Apple, actually, different to Tesla, has a sound, extremely profitable underlying business which will remain viable after the coming new dot-com bust. 

Nowadays all the computing is moving to the cloud. Yes, there will still be  personal computers and company computing machines, but much of the computing will be done via the internet in cloud environment. Apple has long focused on the consumer, so it does not have the enterprise cloud offering of Amazon or Microsoft. But the consumers cloud of Apple is the App Store and it has proved and will continue to prove very powerful. Actually, the fact that Apple claims it does not collect users' data is a powerful advantage over Amazon, Microsoft, Facebook and  Google. Technology companies all strive for monopolies like most other companies. Technology companies tend not to share their technologies and they build their own walled gardens. That is why there are so few very large technology companies mergers and acquisitions. Apple's competitive advantage over Amazon, Alphabet, Microsoft and Facebook is its privacy focused policy, great industrial design and close integration of hardware and software. All this creates an excellent environment for its cloud App Store business go grow a lot in the future.

Currently, however, Apple is overvalued by around 34 %.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

How Low Can Tesla's Stock Price Go? A Valuation

Dear Reader,

Tesla's stock price currently stands at 597.95 USD which amounts to 573.945 billion USD market capitalization. Tesla's market capitalization is approximately 30 % below its recent historic high.

I estimate, however, that the real intrinsic worth of Tesla is around 120 billion USD in the long term or one quarter of the current market capitalization or market price.

To substantiate its even current market capitalization Tesla has to gain an automobile manufacturing market share of around 80 % and achieve 15 % minimum net profit margin. This is very difficult, to say the least. The current leaders like Toyota, Volkswagen and General Motors are very entrenched in the market with significant customer loyalty. In addition, producing cars is characterized by low profit margins, around 4 % for mass producing conglomerates like Toyota and Volkswagen and 7 % for luxury sedan makers like Volkswagen's Audi, BMW and Daimler which produces Mercedes Benz.

Tesla definitely has a first mover advantage, but Tesla is barely profitable. And the other leading automobile manufacturers are quickly catching up and ramping up their electric vehicles production lines. Producing electric vehicles, however, is unprofitable currently without government subsidies. So the major automobile producers are reluctant to commit fully in the long term to electric cars. Producing electric vehicles entails significant consumption of ferrous metals, much more than internal combustion engines vehicle production. And now with the rising economy the prices of base metals are forecasted to go higher, which will make producing electric cars even more lossmaking.

In short, I believe Tesla is worth 120 billion USD in the long term. And my estimate of Tesla's intrinsic value hangs on the assumption that Tesla starts recording profit with exhibiting at least 2- 3 % net profit margins sustainably and without government subsidies.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Technology Stocks' Prices Crash. Bitcoin's Price Implications

Dear Reader,

The prices of technology stocks listed mainly in the US, but also globally, have fallen since the 12th of February 2021.

The fall in technology stocks' prices is driven by the increase in the yields of US government bonds followed by rising yields of government bonds of many countries all over the world.

Since government bonds of the major economies especially are considered risk free any marked increase in the interest rates one receives by investing in government bonds increases the attractiveness of government bonds and diminishes the allure of all other classes, especially investments entailing higher risk like investing in start up technology companies, slightly more mature private technology companies, but also technology companies listed on US and global exchanges.

What is more, both listed and private technology companies have definitely become overvalued over the past two years driven by money creation of central banks, low interest rates and a reach for yield.

Bitcoin is a new and very interesting phenomenon. Bitcoin was not in existence in the 2000-2001 dot com bust of the prices of technology stocks companies. That said, Bitcoin's price in USD has fallen by circa 17 % in the last weeks. 

I forecast Bitcoin will fall more than the Nasdaq Composite. If the yield on 10 year US government bonds goes up to 3 %, I forecast the Nasdaq Composite could fall by 40 % from its recent all time highs, while Bitcoin's price could fall by 60 % from recent peaks.

Will the fall in Bitcoin and technology stocks' price continue? It depends very much on the reaction of monetary authorities. If the Federal Reserve decides to intervene and save everyone like in March 2020 at the onset of the coronavirus pandemic, then the current situation will prove a great buying opportunity. If, however, the market is allowed to clear many now well known technology companies could go bankrupt, Bitcoin's price can fall more than 60 % from the recent historic highs.

What will happen? I forecast the Federal Reserve will take the middle ground. The Federal Reserve will allow interest levels to rise even more from current levels, but will also intervene at some point to prevent the monetary system from falling apart.

I envisage that the Federal Reserve, The European Central Bank, The Bank of Japan, The People's Bank of China and The Bank of England will facilitate even more the advent of Bitcoin and cryptocurrencies. Some leading central banks can even soon issue cryptocurrencies of their own, so called stable coins.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Is Russia's Stock Market Undervalued?

 

Dear Reader,

In terms of valuation the Russian stock market is far behind US and China.

Nation	Calculated Using	12/31/2020	6/30/2020	12/31/2019	6/30/2019	12/31/2018	6/30/2018
Canada	S&P/TSX Composite	22.82	21.67	22.33	23.69	21.37	24.28
US	S&P 500	33.44	29.35	30.91	31.00	28.02	32.20
UK	FTSE 100	13.66	13.22	15.81	15.77	14.29	16.36
Italy	FTSE MIB	22.12	18.71	22.76	21.20	17.69	21.45
Spain	IBEX 35	15.11	12.36	15.49	14.54	13.04	13.90
Russia	MOEX	9.73	8.21	10.05	9.65	7.86	7.87
India	NIFTY 50	29.91	23.29	27.49	27.91	25.86	25.81
Japan*	All public companies, (uncons.)*	31.90	28.50	33.50	32.76	32.99	39.71
Japan*	All public companies, (consol.)*	24.26	21.58	25.28	24.67	24.72	29.62
China	SSE Composite	18.09	15.82	15.80	15.71	13.38	15.49
Hong Kong	Hang Seng	14.10	12.70	14.84	15.55	14.61	16.92
Australia	ASX All Ordinaries	17.99	15.50	17.87	17.94	15.50	17.45

So I would say Russia's stock market is 50 % undervalued. Two factors contribute to the undervaluation of Russian equities listed on the Moscow exchange. One is the price of oil which crashed since 2014. Lately the price of oil has recovered somewhat, but not by much so as to cause a boom in Russian equities similar to the boom in US listed technology shares. The second factor is the sanctions on Russia imposed mainly by the US. Mainly the slump in the price of oil has caused the Russian Ruble to halve in value compared to the USD since 2009. 

Naturally, the GDP of Russia fell from 2.292 trillion USD in 2013 to 1.7 trillion USD in 2019, the latest official figures. 

Gazprom and Lukoil, the two largest petroleum and gas producing companies both in Russia and globally have Price/Earnings ratios of 1.79 and 2.92 which are very low in international comparison.

Currently, many leading Wall Street research analysts are forecasting the price of oil will rise. I think this will significantly raise the market capitalization of the major companies listed in Russia. The Russian Ruble will increase in value. What is more, Wall Street research analysts forecast rises of the main commodities prices. Russia is the world's largest exporter of grains, and a regular top three oil producer along with Saudi Arabia and the USA. Russia's regularly exports oil at more than 100 billion USD value every year. The expected price increases of oil and other major commodities will improve the cash flow and net profit generating capabilities of Russian companies and naturally increase their intrinsic value. What is more, the future prospective strengthening of the Russian Ruble will improve Russia's domestic market strength which would also raise the market capitalization of listed Russian stocks.

What is more, the global economy is forecasted to improve significantly starting from the second quarter of 2021. This would raise the prices of commodities and most probably will decrease the sanctions pressure on Russia which will further strengthen Russia's economy. 

Furthermore, Russia has Yandex, which is an Eastern European search engine popular in the Eastern part of Europe. Yandex is the third largest search engine by market capitalization after Alphabet, Google's owner, and the Chinese Baidu. Russia has long been known for its technological prowess driven by the excellent quantitative skills of its engineers, mathematicians and programmers. Telegram is another technology success story coming out of Russia. So Russia has both companies with operational leverage like Yandex and Telegram and cyclical natural resources producers like Gazprom, Lukoil and others that will benefit from the coming mild economic boom.

All in all, Russia's stock market, barring political instability, is set to outperform almost all major stock markets over the next two years. Russia's stock market, in my opinion, is 50 % undervalued at current levels.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich