In this article, we discuss 10 stocks that the Russia-Ukraine war will affect in the future.
The Russian invasion of Ukraine is now already five-months old but the impact it has had on the global financial markets still continues to hammer stocks across a wide range of sectors. For example, the fertilizer and oil industries are still reeling from the effects of sanctions on one of the largest potash and crude exporters in the world. Crypto firms, which had forecast that the war would be a windfall for the coin market, have crashed amid recession concerns. Defense stocks still hold sway as the biggest winners from a war that shows no signs of slowing down.
Even mega cap tech stocks like Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA) have not stayed immune from the crisis, as the US digests the loss of a large talent hub in the information technology world due to the destruction of Ukraine. The impact of the war on the Russian economy is also dark, with investment bank Goldman Sachs predicting that the Gross Domestic Product (GDP) of Russia will fall by a dangerous 10% this year due to Western sanctions.
Brahim Razgallah, an economist at investment advisory Barclays, has painted an even bleaker picture, forecasting an over 12% drop in the Russian economy in 2022. Razgallah told news platform Bloomberg in May that he thinks the sanctions will be “long-lasting” due to geopolitical events. Barclays economists believe that the slowdown in the Russian economy will accelerate in the second half of 2022 due to fall of private consumption, investment, and imports.
Our Methodology
The companies that have a high chance of being affected by the Russia-Ukraine war in the coming weeks and months were selected for the list. We have mentioned the companies which will be both positively and negatively impacted by the war. 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.
Russia-Ukraine War Will Affect These Stocks in the Future
10. Rocket Companies, Inc. (NYSE:RKT)
Number of Hedge Fund Holders: 12
Rocket Companies, Inc. (NYSE:RKT) is a diversified technology company with interests in the real estate and commerce businesses. The stock has a high chance of being affected by the conflict in Ukraine. This is because the Russian war has resulted in an increase in inflation at a time when supply chain pressures were already weighing on the market, prompting central banks around the world to raise interest rates to tame rising prices. This has led to recession fears and concerns about loan growth at companies like Rocket.
On July 6, Wells Fargo analyst Donald Fandetti upgraded Rocket Companies, Inc. stock to Overweight from Equal Weight and raised the price target to $10 from $6.50, backing the firm to be a beneficiary of the dislocation in the mortgage market.
Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Rocket Companies, Inc., with 1.1 million shares worth more than $12 million.
Just like Meta Platforms, Inc., Alphabet Inc., and Tesla, Inc., Rocket Companies, Inc. is one of the stocks that hedge funds are monitoring.
In its Q4 2021 investor letter, Andaz Private Investments, an asset management firm, highlighted a few stocks and Rocket Companies, Inc. was one of them. Here is what the fund said:
“This volatility i.e., the behaviour of others, is a result of market participants pursuing a few thematic ideas. One is that the cessation of money printing by central banks and the flagging of interest rate rises may favour near-term cashflow oriented stocks over tech stocks. Second, a few stocks that we hold are also held by ETFs run by ARK Investment Management. ARK has been experiencing outflows, as well as bets against their ETFs, and this is amplifying price movements in all of ARK’s stocks. Omicron is also disrupting and impacting societies/economies, obviously, but more broadly this pandemic is now affecting decision-making to the degree where: a) pessimism in one area is translating into over-optimism in other areas, and b) complacency in thought is somehow simultaneously coupled with hyperactive cynicism.
This can be observed not only across various asset classes, but even within a single asset class e.g. comparing various commodities, comparing bonds, equities, and so on. All of this is resulting in price action that is less about long-term security/stock selection or short-term execution, but the path/behaviour of prices during the middle phase.” (Click here to see full text)
9. IPG Photonics Corporation (NASDAQ:IPGP)
Number of Hedge Fund Holders: 34
IPG Photonics Corporation (NASDAQ:IPGP) provides electronic manufacturing services. The firm is one of the few electronic manufacturing players with huge exposure to the Russian market, since around 35% of the employees belong to Russia or Belarus. However, another key aspect where the firm depends on Russia is the facilities it has in the country supply units in Europe with the materials they need to make electronic products. The longer the war drags on, the longer the supplies will be disrupted, affecting the manufacturing in Europe.
On May 4, Citi analyst Jamie Wang upgraded IPG Photonics Corporation stock to Buy from Neutral with a price target of $157, noting that the declining exposure of the firm to China might be a plus in 2022.
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.
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.”
8. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 38
EPAM Systems, Inc. (NYSE:EPAM) provides digital platform engineering and software development services. The company has twinfold exposure to the war in Ukraine. One, a large number of employees of the firm belong to Russia and its surrounding countries, like Ukraine, Belarus, and others. Per Forbes, around 60,000 employees of the firm hail from these areas. Secondly, the stock market in the US has started moving towards value plays and is dumping growth stocks as the economy slows down, putting the firm under pressure as the war continues.
On July 18, Piper Sandler analyst Arvind Ramnani maintained an Overweight rating on EPAM Systems, Inc. stock and lowered the price target to $381 from $403, noting that enterprise technology spend will be pressured in the months ahead as headwinds persist.
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.”
7. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 39
Northrop Grumman Corporation (NYSE:NOC) is an aerospace and defense firm. The war in Ukraine has helped increase the demand for military technology, not only in conflict areas, but also around the world as countries prepare for a long conflict in which taking sides might have economic as well as military consequences. The shares of Northrop are up more than 17%, comparing rather favorably to the fall in the benchmark S&P 500 over the same period which is around 17.30%.
On May 12, Argus analyst John Eade maintained a Buy rating on Northrop Grumman Corporation stock and raised the price target to $495 from $420, backing the firm to deliver an earnings surprise to analysts like it has done consistently in recent years.
At the end of the first quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $940 million in Northrop Grumman Corporation, up from 33 in the preceding quarter worth $561 million.
In its Q1 2022 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Northrop Grumman Corporation was one of them. Here is what the fund said:
“Based in Virginia, Northrop Grumman Corporation is one of the world’s largest defense contractors with annual revenue of more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation has resulted in the US defense market being controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).
Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This has allowed Northrop Grumman Corporation to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximate 15x next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-18, the F-35 and the F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; Raytheon dominates missile systems; and so on.
Northrop’s revenue growth over the past decade has been mediocre but even that has led to impressive shareholder returns that have far outpaced the S&P500. What’s more, we believe that revenue growth may accelerate in the next few years. A lot of ink is spilled every year about the “massive” U.S. defense budget that critics claim is “out of control”. Given this, you might be surprised to hear that U.S. defense spending as a share of GDP is at the lowest level in recorded history, at a mere 3.8%. In other words, U.S. military spending could double and not be out of line with historical norms. While we are not calling for a new Cold War, given the global instability we are witnessing, it is not unreasonable to expect U.S. defense spending to grow faster than GDP over the next decade.”
6. Barrick Gold Corporation (NYSE:GOLD)
Number of Hedge Fund Holders: 45
Barrick Gold Corporation (NYSE:GOLD) is a mining firm with prime interests in gold and copper. The Russian war in Ukraine has helped increase market volatility and uncertainty. As recession fears mount in light of rising interest rates and soaring inflation, investors have started pouring into gold. Gold is considered one of the best hedges in times of inflation, leading to a mini-boom for mining stocks with strong exposure to the gold market, like Barrick Gold. Along with gold, the prices of other precious metals and rare earths are also on the rise.
On July 19, Barclays analyst Matthew Murphy maintained an Overweight rating on Barrick Gold Corporation stock and lowered the price target to $25 from $28, noting that margin pressures on copper stocks would continue in the near term.
At the end of the first quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Barrick Gold Corporation, compared to 46 the preceding quarter worth $958 million.
In addition to Meta Platforms, Inc., Alphabet Inc., and Tesla, Inc., Barrick Gold Corporation is one of the stocks that elite investors are keeping a close eye on.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Barrick Gold Corporation was one of them. Here is what the fund said:
“Also within the structural bucket, we have selectively added to our commodity exposure with the purchase of Barrick Gold Corporation. Canadian mining company Barrick Gold is a play on operating improvements. The company has aggressively delevered its balance sheet and reduced capex spending to a lower level more permanently, directing its healthy free cash flow to dividends and buybacks.”
5. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 46
Coinbase Global, Inc. (NASDAQ:COIN) owns and runs a cryptocurrency exchange platform. At the beginning of the Russian invasion of Ukraine, crypto prices were on their way up as Western sanctions on Moscow forced investors to look towards crypto as a way into the Russian market. However, since then, the rising inflation has resulted in a massive drop in crypto prices, crashing the coin market. The Russian connection has so far been unable to support the industry.
On July 14, DA Davidson analyst Christopher Brendler maintained a Buy rating on Coinbase Global, Inc. stock and lowered the price target to $90 from $135, backing the firm to navigate near-term challenges despite falling volumes.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Renaissance Technologies is a leading shareholder in Coinbase Global, Inc., with 1 million shares worth more than $199 million.
In its Q4 2021 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Coinbase Global, Inc. was one of them. Here is what the fund said:
“We also have seen plenty of IPO/SPAC craziness showing both that private players need public markets more than they admit and that there is more volatility embedded in these newer companies than a private quarterly mark might admit. As for how efficient both the private and public markets are, we would encourage you to really delve into some of those multi-hundred-page S1s for many of the newest public companies to see the huge gap between the last valuation at which the company was funded and/or granted shares to its executives and the often much higher price at which the company went public – Coinbase Global, Inc. is a prime example.”
4. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 49
Spotify Technology S.A. (NYSE:SPOT) provides audio streaming services. The entertainment sector has been hammered by the recession fears in the US. This is because the industry was already reeling from the pressures of the pandemic and looking forward to a post-pandemic boom when the invasion took place, leading to a dramatic rise in inflation and a lull in spending. Spotify, as one of the leading streaming firms, is also in the limelight as it debates balancing rights concerns with access to information. It has shut Russian operations already.
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 recession fears were weighing on entertainment and streaming stocks.
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.”
3. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 66
The Mosaic Company (NYSE:MOS) markets phosphate and potash crop nutrients. The fertilizer industry has been affected by the Russian war in Ukraine since Moscow is the largest fertilizer exporter in the world. As supplies from the country are disrupted and businesses are sanctioned, countries in North America and Europe are looking at local firms to fill in the fertilizer gap. Export bans in China, which wants to protect food security due to the war, have increased prices of fertilizers further, leading to a boom for stocks like Mosaic.
On July 14, Credit Suisse analyst John Roberts initiated coverage of The Mosaic Company stock with an Outperform rating and a price target of $60, highlighting the importance of the Brazil business of the firm that is the fastest growing fertilizer market.
At the end of the first quarter of 2022, 66 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in The Mosaic Company, compared to 46 in the preceding quarter worth $1.3 billion.
In its Q4 2021 investor letter, Ariel Investments, an asset management firm, highlighted a few stocks and The Mosaic Company was one of them. Here is what the fund said:
“We continue to believe recent aggressive fiscal and monetary policy will drive high levels of intransient (rather than transitory) inflation. Recent inflation numbers have exceeded our hawkish predictions. While we believed the Consumer Price Index might rise +4% in 2021, double the Fed target of +2%; it rose +7%, the highest level in forty years. Ariel Focus Fund has been well positioned for this environment as natural resource and material companies such as The Mosaic Company which returned +72.15% for the year. This was one of our two largest holdings at year-end and have performed well very early into 2022.”
2. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Exxon Mobil Corporation (NYSE:XOM) is an integrated oil and gas firm. Like fertilizers, Russia also exports oil. As one of the largest oil exporting nations in the world, the war has placed an additional pressure on oil prices that were already sky-high due to a surge in post-pandemic demand. The longer the war drags on, the further the prices of oil are likely to climb. Stocks like Exxon are set to benefit tremendously from this macro environment.
On June 20, HSBC analyst Gordon Gray maintained a Hold rating on Exxon Mobil Corporation stock and raised the price target to $97.50 from $92.50, noting that the correction in the oil sector in the past month had left valuations looking attractive.
At the end of the first quarter of 2022, 83 hedge funds in the database of Insider Monkey held stakes worth $8.5 billion in Exxon Mobil Corporation, compared to 71 in the preceding quarter worth $5.3 billion.
In its Q4 2021 investor letter, Saturna Capital highlighted a few stocks and Exxon Mobil Corporation was one of them. Here is what the fund said:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon Mobil Corporation, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
1. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 88
Expedia Group, Inc. (NASDAQ:EXPE) operates as an online travel firm. Travel firms had a torrid 2020 and 2021 because of the Coronavirus. A mini-boom for the industry was disrupted by the Russian invasion of Ukraine that has impacted tourism in Europe. Rising inflation due to the war has also led to a lull in consumer spending. So travel firms like Expedia are dealing with twin pressures of the war that are unlikely to go away until the conflict is resolved. Russia is also a popular tourist destination and revenues have been affected due to the war.
On July 14, Truist analyst Naved Khan maintained a Buy rating on Expedia Group, Inc. stock but lowered the price target to $185 from $240, noting that the near-term outlook for travel was strong but there were recession fears looming.
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.”
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This article is originally published at Insider Monkey.
