Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Goldman Sees Love In Russia, Should You?

|Includes: ERUS, VanEck Vectors Russia ETF (RSX), RSXJ
On Tuesday, Jim O'Neill, head of asset management at Goldman Sachs and the gentleman perhaps most known for coining the term "BRIC" in reference to the Brazil, Russia, India and China quartet, made an interesting, and by his own admission, controversial proclamation in saying Russia is his preferred pick among emerging markets investment opportunities right now.

For U.S investors, Russia can be a vexing market, fraught with both peril and potential. Like it or not, government corruption is usually an issue when investing in the emerging markets. That argument is valid when discussing China and India, but Russia almost certainly takes the corruption cake among the BRIC countries.

In addition, U.S. investors looking to tap into Russia's growth story don't have as nearly as many options when it comes to individual American depositary receipts. Think about it. You can probably name 10 Chinese stocks and four or five Brazilian stocks that trade here in the U.S. Naming three Russian companies listed in the U.S. is a more trying task.

However, there are 47 ETFs that offer exposure to Russia, but investors need to know what investing in Russia means. It has been said before, but I'll repeat it here: Buy a Russia-specific ETF such as the Market Vectors Russia ETF (NYSE: RSX), the largest and most liquid of the four Russia-specific funds, and you're essentially buying an oil ETF. You can take my word for it, but the chart below illustrates the point.

etf,leverage etf,exchange-traded fund,etfs,exchange-traded funds,etf profit report,global profits alert,jim trippon

Sure, there are some divergences along the way, but at the end of the day, RSX and oil prices share an intimate correlation. That's no surprise. Oil and gas names account for 38% of RSX's weight. RSX's primary rival, the iShares MSCI Russia Capped Index Fund (NYSE: ERUS) goes even further with an almost 53% allocation to the energy patch. There you have it. Buy a large-cap Russia ETF and you're getting massive oil exposure, but where do investors turn if they want Russia exposure while dialing back on the oil theme?

I know it may seem like a wild thought in an environment that has suddenly turned risk-averse, but the one Russia-specific ETF that I'll be watching the most over the coming weeks and months is the newly minted Market Vectors Russia Small-Cap ETF (NYSE: RSXJ).

Sure, energy names account for nearly 18% of RSXJ's weight, but four other sectors, utilities, materials, industrials and consumer staples also receive double-digit weights. Put another way, if Goldman is right, and the bank often is, and Russia does outperform other emerging markets, doesn't it make sense to have the broadest possible exposure to the Russian economy? I know that's what I'm looking for in my ETF trades. Russia's a big country with enormous economic potential, but in this case, it may best to think small. Small-cap that is.


Click HERE to learn more about the ETF Profit Report - An ETF Trading Service For Serious ETF Investors
How To Profit From "Quick Strike" ETF Trading

We recently bagged gains of 16.2%, 6.78%, 1.34%, 5.85%, 7.77%, and 10.7% for our subscribers.

In today's low interest rate backdrop, those gains would not be bad if they were annual.

But these happened in the last three weeks.

Click HERE for more details.


For more information and archived issues, visit http://www.globalprofitsalert.com

Global Profits Alert (GPA) is published by Trippon Financial Research, Inc. a financial media organization with offices in the United States, Hong Kong and Mainland China. GPA is written by Jim Trippon in conjunction with George Wolff, Sunny Wang, Todd Shriber, Kelley Damiani and J. Daryl Thompson.

Would you like to republish this article? Global Profits Alert issues can be republished, as long as the republished issues contain the name of the author(s) and the following short paragraph:

This information was brought to you by GlobalProfitsAlert.com, a publication of Trippon Financial Research, Inc. GlobalProfitsAlert.com publishes information on Investing in the China stock market and emerging markets, dividend stock and income investing, exchange traded funds (ETFs), green energy stocks, technology stocks, global market trends and other investment information. To view archives or subscribe, visit http://www.globalprofitsalert.com