For those who play in Russia, they know Gazprom (OGZPY, quote) is not an “investment”, it’s a “trade”
View from the rigging of Gazprom’s Sahkalin-2 oil well in the Okhotsk Sea
i.e.: I’m not buying this stock because I believe in a fundamental thesis call on a strong backdrop of industry, management, balance sheet, etc. I’m buying this stock because I think it can go higher but I will dance near the door.
A company so wickedly inefficient and corrupt has been nothing short of a disastrous investment since the go-go days of 2006 and 2007 when it was in fact an “investment”.
Looking at the chart, Gazprom has had an impressive run off the lows in June with +44% move higher. Now at $9.45 the stock runs into resistance that goes back to last year December and is where you have to watch currently.
A break higher here means you may have some room to run to $12.00 area. There are fundamentals driving this call and carried in with a view that emerging markets can rally with the Fed sidelined on taper (I think through December) you may have some wind at your back.
Gazprom grew production in September for the third month in a row and while this comes at a time when the independent gas companies in Russia (RSX, quote), all local players, are about to flood the domestic market with gas.
Gazprom is also seeing increased export demand. Both Western Europe and the FSU have increased their deliveries, and the October y/y comps are very attractive for Gazprom to print another great month.
The conditions that have led to tight gas supplies in Europe and therefore Gazprom’s recent surge may indeed be temporary. To be clear Gazprom has been in disbelief for a decade about the production growth story domestically and the U.S. led shale gas revolution.
Never fall in love with Gazprom but know that when large macro players and hedge funds want to play Russia for a “trade”, it’s usually not in the first inning of a rally and it is often through big liquid proxy plays like Gazprom. Keep Gazprom on your watch screen.