In this article, we discuss 10 stocks that the Russia-Ukraine war is crushing.
The American companies that have outsized exposure to the Russian market have been crushed in the past few months. This decline is a direct result of the Russian invasion of Ukraine that has resulted in a disruption of business activity in the region and tough Western sanctions on Moscow. Since the start of the war in late February, all major indexes of the market are trading in the red, although part of the reason for this decline can also be attributed to soaring inflation and a rise in interest rates leading to recession fears.
The ruble, the local currency in Russia, has also crashed. US-based exchange traded funds which hold Russian stocks are tanking too. Elite investors are scrambling to reduce their exposure to the Russian market. Per a report by news platform Forbes, the Emerging Markets Fund of GQG Partners, a Florida-based hedge fund led by investor Rajiv Jain, had trimmed Russian exposure to nearly 4% within a week of the Ukraine invasion from 16% at the start of the year. The iShares MSCI Russia ETF is down nearly 81% year-to-date, as of July 8.
Some of the stocks getting crushed by the Russia-Ukraine war include Expedia Group, Inc. (NASDAQ:EXPE), Spotify Technology S.A. (NYSE:SPOT), and EPAM Systems, Inc. (NYSE:EPAM).
Our Methodology
The companies that have been affected by the Russia-Ukraine war were selected for the list. Only firms that have registered a more than 25% decline in their share price year-to-date as of July 8 were considered. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Danial Igdery on Unsplash
Russia-Ukraine War is Crushing These Stocks
10. Coty Inc. (NYSE:COTY)
Number of Hedge Fund Holders: 30
Year-to-Date Decline in Share Price as of July 8: 25.89%
Coty Inc. (NYSE:COTY) makes and sells beauty products. Nearly 2.5% of all sales of the firm come from Russia. Amid Western sanctions on the country, these sales have been directly affected, resulting in a substantial loss in revenue. The firm delayed closing down operations in Russia till late April, not following other American brands that had closed operations in the country since early March. The firm posted total sales of more than $4 billion in 2021. The firm has said the closure of Russian operations will not affect 2022 guidance.
On June 30, Piper Sandler analyst Korinne Wolfmeyer initiated coverage of Coty Inc. stock with a Neutral rating and a price target of $8, noting the heavy exposure of the company to prestige fragrance could create tough upcoming comps.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Melvin Capital Management is a leading shareholder in Coty Inc., with 29 million shares worth more than $264 million.
Just like Expedia Group, Inc., Spotify Technology S.A., and EPAM Systems, Inc., Coty Inc. is one of the stocks feeling the heat of rising geopolitical tensions.
In its Q3 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Coty Inc. was one of them. Here is what the fund said:
“Coty Inc. is a global beauty company primarily made up of its market leading prestige fragrance business and a mass cosmetic business acquired from P&G that includes brands such as Covergirl. It is a turnaround story catalyzed by the new CEO, Sue Nabi, an experienced beauty expert who previously worked at L’Oreal and successfully executed turnarounds and the relaunch of its Lancome and L’Oreal Paris brands. Early signs are supportive of improving performance in Coty’s cosmetics business. Coty Inc. should also benefit from an accelerating growth trend in its prestige fragrance business driven by purchases shifting online and the category’s emerging popularity.”
9. The Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Holders: 46
Year-to-Date Decline in Share Price as of July 8: 29.96%
The Estée Lauder Companies Inc. (NYSE:EL) markets personal care products. In March, investment advisory JPMorgan named Estée Lauder among a basket of stocks that have over 4% of revenue exposure to the Russian market. The stock has since underperformed the wider market amid US sanctions on Russia. The company has already closed all stores it owns in Russia, directly hitting this revenue stream. A macro drop in consumer spending due to inflation is also hitting the shares.
On May 4, RBC Capital analyst Nik Modi maintained an Outperform rating on The Estée Lauder Companies Inc. stock and lowered the price target to $322 from $361, noting that lockdowns in China were affecting the distribution of the firm.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in The Estée Lauder Companies Inc., with 5.7 million shares worth more than $1.5 billion.
8. Mohawk Industries, Inc. (NYSE:MHK)
Number of Hedge Fund Holders: 33
Year-to-Date Decline in Share Price as of July 8: 32.98%
Mohawk Industries, Inc. (NYSE:MHK) makes and sells flooring products. The firm has outsized exposure to the Russian market compared to American peers. In order to sell flooring products around the world, the firm produces laminate in Russia to maximize market share. The supply of this has been affected due to Western sanctions on Moscow, hitting the business of the company in Russia, Ukraine, and Australia, as well as North America. The firm is the biggest carpet and tile maker in the world.
On June 28, Wells Fargo analyst Deepa Raghavan maintained an Equal Weight rating on Mohawk Industries, Inc. stock and lowered the price target to $137 from $155, noting that there was “softness” in new house construction and renovation spend.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Pzena Investment Management is a leading shareholder in Mohawk Industries, Inc., with 1.7 million shares worth more than $217 million.
In its Q3 2021 investor letter, White Brook Capital, an asset management firm, highlighted a few stocks and Mohawk Industries, Inc. was one of them. Here is what the fund said:
“During the quarter, White Brook exited Mohawk Industries, Inc.. Mohawk is a founder-run leading flooring supplier, globally. I sold our position as tensions between Russia and Ukraine were beginning to build. Mohawk Industries, Inc. has a small factory in Russia, and I concluded that even if commercial and residential flooring needs were to grow in the region, transportation of those goods across eastern europe would, at best, be more costly. At the time, I expected a level of harassment and additional cost at the border, but was hyper aware of what followed when other autocrats in recent history built troops on their neighbors’ borders. The worst case ended up coming true, but White Brook Capital was out of the investment weeks before – able to trade a cheap, global, construction supplier with an overly conservative balance sheet for another that was also cheap, but levered to the US housing market instead, and was using their balance sheet to increase each share of stock’s per share earnings in front of anticipated growth. In making the transition, given the ability to better understand the US construction and renovation market vs the global flooring market, the position’s size was also increased. Mohawk ultimately represented a positive but unspectacular IRR given the length of time the investment was held.”
7. PVH Corp. (NYSE:PVH)
Number of Hedge Fund Holders: 37
Year-to-Date Decline in Share Price as of July 8: 45.71%
PVH Corp. (NYSE:PVH) operates as an apparel firm. Some of the famous brands it owns and runs in Russia include Tommy Hilfiger, Calvin Klein, and Heritage. The firm announced in March that it would be closing all stores in Russia and pausing commercial activities in the region due to the Russian invasion of Ukraine. The firm has already detailed that it will revise guidance numbers for 2022 by up to 3% because of the disruption of operations in Russia and the pause in sale of wholesale items in Ukraine.
On June 6, UBS analyst Jay Sole maintained a Buy rating on PVH Corp. stock and lowered the price target to $132 from $156, noting that elevated macro risk was one of the prime reasons behind the target revision.
At the end of the first quarter of 2022, 37 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in PVH Corp., compared to 38 in the preceding quarter worth $2 billion.
In its Q1 2022 investor letter, FPA Queens Road, an asset management firm, highlighted a few stocks and PVH Corp. was one of them. Here is what the fund said:
“PVH Corp., owner of Calvin Klein and Tommy Hilfiger brands, fell during the last 12 months as the company continues to struggle with supply chain issues resulting in delivery delays. During the first quarter, the company lowered its guidance, causing a sharp selloff in the stock. Some analysts worry that a slower-than-expected rebound in international travel may have a negative impact on the company this year (70% of sales are ex-US). Despite these concerns, management is projecting modest revenue growth and near record gross margins for 2022, and we remain confident in the company’s long-term prospects.”
6. IPG Photonics Corporation (NASDAQ:IPGP)
Number of Hedge Fund Holders: 34
Year-to-Date Decline in Share Price as of July 8: 45.90%
IPG Photonics Corporation (NASDAQ:IPGP) provides electronic manufacturing services. The firm, based in the US, has outsized exposure to the Russian market since it operates manufacturing facilities in Russia and Belarus. Around 35% of the employees of the company operate from these facilities. In addition, the Russian unit of the firm also supplies the components that enable facilities of the firm in Europe to make electronic products. The supplies to these have also been disrupted in the wake of the war.
On May 4, Citi analyst Jamie Wang upgraded IPG Photonics Corporation stock to Buy from Neutral with a price target of $157, appreciating the strong first quarter results posted by the company.
At the end of the first quarter of 2022, 34 hedge funds in the database of Insider Monkey held stakes worth $435 million in IPG Photonics Corporation, compared to 25 the preceding quarter worth $504 million.
Alongside Expedia Group, Inc., Spotify Technology S.A., and EPAM Systems, Inc., IPG Photonics Corporation is one of the stocks that hedge funds are watching amid rising tensions in Europe.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and IPG Photonics Corporation was one of them. Here is what the fund said:
“IPG Photonics Corporation is the leading provider of fiber laser technology for industrial automation markets. Fiber lasers are faster, more powerful and efficient, yet require less maintenance and labor to operate than traditional lasers used in industrial applications—cutting and welding, marking and engraving, and micro-processing. When we initiated our campaign, we believed the company was poised to benefit from additional use cases for fiber lasers, including in the manufacturing processes of electric vehicle batteries and solar panels and in medical applications such as kidney stone removal. However, the company recently indicated supply chain delays and slowing growth in China— nearly 40% of the company’s revenue—were weighing on growth, and the exposure to emerging applications is not yet meaningful enough to offset these headwinds. With limited visibility into when these challenges may abate, we exited our GardenSM position in favor of other industrial technology holdings with stronger fundamental trends.”
5. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 88
Year-to-Date Decline in Share Price as of July 8: 47.72%
Expedia Group, Inc. operates as an online travel firm. The Russian invasion of Ukraine has disrupted travel and tourism in Europe, affecting the post-pandemic boom in travel. A decline in consumer spending due to rising inflation has also affected the shares. In early March, the company announced that it had ceased offering travel and tourism services to Russia. However, services to Moscow from two destinations in the US still continue to be offered, per the website of the firm.
On July 7, Evercore ISI analyst Mark Mahaney maintained an In Line rating on Expedia Group, Inc. stock and lowered the price target to $154 from $222, noting that high cost inflation pressures were weighing on large cap internet stocks.
At the end of the first quarter of 2022, 88 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in Expedia Group, Inc., up from 82 in the previous quarter worth $7.4 billion.
In its Q1 2022 investor letter, Aristotle Capital Management, an asset management firm, highlighted a few stocks and Expedia Group, Inc. was one of them. Here is what the fund said:
“Expedia Group, Inc. outperformed in the first quarter following a better-than-expected earnings report for the company’s fourth quarter of 2021. During the pandemic, the company reduced expenses which has improved operating leverage as revenue recovers. Expectations for travel in 2022 have improved as COVID cases have declined.”
4. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 38
Year-to-Date Decline in Share Price as of July 8: 48.75%
EPAM Systems, Inc. provides digital platform engineering and software development services. The company has strong exposure to the Russian market. Per Forbes, a majority of the 60,000 employees of the firm come from regions in and around Russia. These countries, severely affected by the war, include Ukraine, Belarus, and Russia itself. A large correction in the value of technology stocks in the wake of soaring inflation and a rise in interest rates has hammered the shares as well.
On June 6, Wedbush analyst Moshe Katri maintained an Outperform rating on EPAM Systems, Inc. stock and raised the price target to $400 from $380, noting that moderating disruption from the Russia-Ukraine war bodes well for the results of the firm.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in EPAM Systems, Inc., with 561,600 shares worth more than $166 million.
Carillon Tower Advisers, in its Q1 2022 investor letter, mentioned EPAM Systems, Inc.. Here is what the fund has to say in its letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. EPAM Systems, Inc. offers information technology services. The company struggled amid geopolitical instability given its 14,000 employees in Ukraine and associated operational, relocation, and travel costs. The Fund sold the stock.”
3. Carnival Corporation & plc (NYSE:CCL)
Number of Hedge Fund Holders: 32
Year-to-Date Decline in Share Price as of July 8: 56.42%
Carnival Corporation & plc (NYSE:CCL) is a leisure travel firm. In 2022, before the Ukraine war broke out, the firm had nearly 4% of total cruise capacity calling on Russian ports. In the wake of the Russian invasion, the company has been forced to cancel these stops at Russian ports. One of the most popular tourist stops is at Saint Petersburg and the disruption of services to the port has affected consumer confidence in the stock. Recession fears have also weighed on the stock in recent weeks.
On June 29, Morgan Stanley analyst Jamie Rollo maintained an Underweight rating on Carnival Corporation & plc (NYSE:CCL) stock and lowered the price target to $7 from $13, noting the weak second quarter results and guidance numbers of the firm.
At the end of the first quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $369 million in Carnival Corporation & plc (NYSE:CCL), compared to 33 in the previous quarter worth $470 million.
2. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 49
Year-to-Date Decline in Share Price as of July 8: 56.66%
Spotify Technology S.A. provides audio streaming services. The firm was one of the first big internet giants to suspend Russian operations indefinitely when the Ukraine war broke out in late February. Back then, the firm had removed content linked to Russian propaganda news outlets on the platform as well. In late March, the firm said it was pulling out of Russia due to a new law that threatens jail for those spreading fake news about Russia. The firm cited safety concerns for staff as the prime reason behind the decision.
On July 7, Citi analyst Jason Bazinet maintained a Buy rating on Spotify Technology S.A. stock and lowered the price target to $150 from $165, noting that entertainment and advertising stocks were on the decline due to recession fears.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in Spotify Technology S.A., with 4.3 shares worth more than $662 million.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Spotify Technology S.A. was one of them. Here is what the fund said:
“We also added to our positions in Spotify Technology S.A.. The company has large addressable markets with strong brands that should allow them to take significant market share over time. We believe Spotify Technology S.A. is appropriately financed and should generate significant cash to continue investing in their businesses for further growth.”
1. VEON Ltd. (NASDAQ:VEON)
Number of Hedge Fund Holders: 11
Year-to-Date Decline in Share Price as of July 8: 74.30%
VEON Ltd. (NASDAQ:VEON) is a Netherlands-based company that offers telephone and mobile communication services. The firm has heavy exposure to the Russian market and the war in Ukraine has hit this revenue as the West sanctions dealings with Moscow. Per Forbes data, nearly half of the total revenue of the company, which was around $7.8 billion in 2021, came from the Beeline network it operates in Russia. Although the earnings of the firm have grown in local currency in Russia, they have decreased in dollar terms.
On June 8, VEON Ltd. announced that it had completed the sale of its unit in Georgia. The unit was sold to a former partner of the firm in a deal valued at $45 million. Kaan Terzioglu, the CEO of the firm, said the sale was part of a plan to streamline operations.
At the end of the first quarter of 2022, 11 hedge funds in the database of Insider Monkey held stakes worth $23 million in VEON Ltd., compared to 15 in the previous quarter worth $52 million.
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This article is originally published at Insider Monkey.
