Topic: How To Invest

Pat, could I get your analysis of Lukoil ADRs and Exxon? Thanks.

Article Excerpt

Lukoil (ADR), $65.85, symbol LUKOY on the U.S. over-the-counter market (ADRs outstanding: 1.1 billion; Market cap: $55.8 billion; www.lukoil.com), produces, refines, markets and explores for oil and gas around the world. Its exploration and production activities are primarily in Russia, Azerbaijan, Kazakhstan, Uzbekistan, the Middle East, South America, Africa and Southeast Asia. Lukoil trades at a lower price-to-earnings multiple than many major western integrated oil stocks. For example, it trades at just 5.3 times its latest 12 months of earnings, where Exxon Mobil (see below) trades at 9.2 times earnings. However, that low p/e ratio reflects the considerable political risk of investing in Russia, where there continues to be uncertainty surrounding the rule of law, corporate governance, transparency and property rights. There is also an ongoing risk of confiscation or expropriation of assets by the Russian government or its political allies. Large stakes of Lukoil are also held by oligarchs (members of a small ruling faction), including Vagit Alekperov, who owns…