By Tim Seymour
Yandex (NASDAQ:YNDX), the Google of Russia, was +4.5% today and now +9% in three days after the drubbing of emerging markets and Russia saw a lot of momentum players sell stock and some directional players shorting stock.
While it is not surprising to see current indiscriminant selling of EM stocks, especially those that have had big moves higher in the preceding months, it is hard to understand how Yandex was sold off 20% in 2 weeks.
Know this about Yandex: this is a "national champion" stock in Russia which means that the government believes this company is representative of the strength of Russia and that it should compete on a global stage with other players of similar resources and prowess.
What is this "strength of Russia?" In Silicon Valley, and around the tech globe, this is world class programming and technological innovation.
Russians are at or near the helm of some of the world's most sophisticated tech companies (see Google (NASDAQ:GOOG) for example).
Yandex has held off losing market share to Google in Russia for years. In fact, Yandex has the same market share as it held in 1997 (62-64%) despite expectations that Google would dominate once they truly entered the market to take on the local Russian incumbent.
There are very few companies who can compete with Google globally. Yandex is one (Baidu (NASDAQ:BIDU) the other).
Also know that in emerging markets, from an eCommerce perspective, the search model is the preferred gateway (more than social media). Search dominates in EM, and mobile is exploding.
Mobile pricing for Yandex is structurally advantaged, and as the move to mobile broadens, YNDX is better positioned than Baidu or even Google to see higher profitability from their growth.
Yandex delivers 40% growth at 35x EPS, which means that growth/value ratio is better than Google and Baidu, both companies that I think offer very attractive growth for a reasonable price.
Lesson: When the sky is falling in emerging markets it is difficult to close your eyes and buy quality and valuations that are compelling. Yandex is a classic case of an opportunity you need to do your work on and buy when there is a significant pullback.