Wednesday, February 26, 2014

Seeking Alpha: Magnit Has Some Attractive Qualities

Emerging market investing isn't for everybody, but the rewards can be pretty appealing. Even in a relatively unexciting area like food retailing, CBD (CBD) and FEMSA (FMX) have done considerably better than the S&P 500 over the past five years, returning 242% and 277%, respectively, against about 139% for the U.S. index. Granted, FEMSA is not purely a retailer and not all retailers have done so well - Wal-Mart de Mexico (OTCQX:WMMVY) is up about 104% over that same stretch, while Turkey's BIM is up only 14% and South Africa's Shoprite is down around 23%.

That brings me to Russia and Magnit (OTC:MGJCL), Russia's largest food retailer by store count and sales volume. Right off the bat, I'll warn readers that this is a stock that will require a little extra effort - there is no trading U.S. ADR that I aware of, though there is a highly liquid GDR in London (MGNT) that should be accessible if your broker allows you to trade foreign stocks (many, if not most, brokers now have systems in place to handle online foreign stock trades).

It stands to reason that a stock that requires extra effort to own had better offer something worthwhile. I believe Magnit does. Magnit is growing at an exceptionally fast pace, but still has a large market share growth opportunity, not to mention free cash flow leverage from above-average margins. Many readers won't even consider investing in Russian stocks, but I believe Magnit is worth a closer look from more aggressive and risk-tolerant investors.

Please continue:
Magnit Has Some Attractive Qualities

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