Time to Take Profits on Pakistan ADRs

After the assassination of Pakistani opposition leader Benazir Bhutto, the booming Karachi stock exchange plummeted over the course of several days. So did Pakistani ADRs... with a suitable delay caused by the government-ordered suspension of trading. (We covered this situation both on our home page and right here on Seeking Alpha.com over several days.)

Since this happened at a time when most newsletter and trading service editors were still on their Christmas vacation, we were pretty much the only ones covering this buying opportunity. Hey, it's not rocket science: You buy when markets and stocks are low... and you hope to sell when they move up again. If you're awake and at your desk that is...

Accordingly, we monitored the performance of the top Pakistani ADRs throughout the critical period: right away we mentioned that, while the steep decline in the Karachi stock indexes still had to work its way into the respective ADR prices, the after-effects of this terrorist act will bottom out early in the following week, at which point crisis investing bargain hunters should be ready to snap up depressed share at at least 10% discounts. The next day, we said that PakTel and MCB Bank in particular represented attractive buying opportunities as the Karachi stock exchange would slowly grind back into its bullish tracks by late winter.

Well, here's what our crisis trades have achieved so far. Not all are spectacular winners, but hey... we take up to 36% in two months any old day:

Electricity provider Hub Power Co. (HUPOF.PK) is the laggard of our group of Crisis Trading ADRs. It is up just 6.5% since January 3/4. Not that we're complaining, mind you... the Dow Jones Industrial Index is down -4% over the same period.

Leader of the pack is top Pakistani bank MCB Bank Ltd. (MCBBI.PK). This ADR has been rallying in the past days and is up 32% since our recommendation. Not bad for eight weeks of letting the markets do all the heavy lifting. If we say so ourselves.

The other Pakistani bank large enough to have an ADR trading in the States is United Bank Ltd. (UDBKL.PK). It, too, has recovered nicely, rising 18.6% in the portfolios of crisis traders since the first week of January.

Pakistan's Oil & Gas Development Co. Ltd. (ODVCI.PK) is also back from the dead. Its ADR price has risen by 13%, most of the gains materializing in the aftermath of the postponed elections.

And last not least, there is the country's telecommunications giant Pakistan Telecommunication Co. Ltd. -- PakTel -- (PKTMF.PK) whose ADR gained 12.3%.

Time to take profits of the table: Pakistani stocks may have reached their pre-crash highs again. But quite honestly, we don't see much of an upside left as the country will continue to be rocked by political upheaval as one of the global flashpoints of militant Islamism hell-bent on bombing its culture back into a crude bronze-age theocracy.

Crisis trading is one of the mainstay strategies of making short-term global profits even in a bear market. A colleague of mine summed up the principle quite well: If there's a major political crisis in any given country -- a highly publicized terror attempt, a bombing, a coup attempt -- simply go to ADR.com and pull up a list of the ADRs trading for that particular country. Wait for two or three days and then buy the ADRs that have sold off most.

It works like a charm in most scenarios.