In this article, we discuss 10 stocks affected by sanctions on Russia. If you want to skip our detailed analysis of these stocks, go directly to Sanctions on Russia Are Affecting These 5 Stocks.
Calls for American businesses to shut down operations in Russia out of solidarity for the people of Ukraine and concerns around safety of their staff have mounted in recent days. Top investment advisors like the Bank of America and JPMorgan have already identified US-based companies with outsized exposure to the Russian market as Washington sanctions business dealings with Moscow. The stock market has reacted to these developments and trading volumes of multinationals have surged, especially in the food and energy sector.
US companies not pulling out of Russia ‘will hurt business’
Some of the top stocks in the spotlight amid sanctions on Russia include McDonald’s Corporation (NYSE:MCD), Spotify Technology S.A. (NYSE:SPOT), and Pioneer Natural Resources Company (NYSE:PXD), among others discussed in detail below. Most US-based businesses with extensive operations in Russia have so far refused to pull out of the country. However, many have pledged to donate profits from product sales in Russia to victims of the Ukraine war.
According to Mark Hass, a communications specialist at Arizona State University, this decision could hurt business more broadly than just in Russia. Hass told news agency AFP on March 8 that the “economic interests” of US companies in Russia that have chosen to stay despite the war in Ukraine were outweighed by the “reputational” interests. Hass cited social media and the outcry around choosing profits over actual lives as some of reasons that could come back to haunt these companies in the long-term.
Our Methodology
The companies that have been significantly affected by Western sanctions on Russia were selected for the list. Data from around 900 elite hedge funds tracked by Insider Monkey at the end of December 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Speedcurve Performance Analytics
Sanctions on Russia Are Affecting These Stocks
10. Kimberly-Clark Corporation (NYSE:KMB)
Number of Hedge Fund Holders: 32
Kimberly-Clark Corporation (NYSE:KMB) makes and sells personal care products. Hedge funds have been piling into the stock. At the end of the fourth quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $309 million in Kimberly-Clark Corporation (NYSE:KMB), compared to 28 in the preceding quarter worth $410 million.
Neary 2.3% of the all product sales of Kimberly-Clark Corporation (NYSE:KMB) come from Russia. As the US government limits the workings of US-based businesses in Russia, Kimberly-Clark Corporation (NYSE:KMB) could take a major hit in revenue over the coming weeks. The stock has fallen close to 3.5% in the past five days as the war escalates.
Just like McDonald’s Corporation (NYSE:MCD), Spotify Technology S.A. (NYSE:SPOT), and Pioneer Natural Resources Company (NYSE:PXD), Kimberly-Clark Corporation (NYSE:KMB) is one of the stocks on the radar of institutional investors.
9. Coty Inc. (NYSE:COTY)
Number of Hedge Fund Holders: 36
Coty Inc. (NYSE:COTY) makes and sells beauty products. The company is another stock with outsized exposure to the Russian market compared to peers. Almost 2.5% of all sales of the firm come from Russia. These sales would vanish almost overnight as the West bans dealings with Russian companies. Moscow could also move to limit the presence of US brands in the country as the sanctions start to bite. The stock has tanked over 16% in the past five days.
Elite hedge funds continue to hold large stakes in Coty Inc. (NYSE:COTY). Among the hedge funds being tracked by Insider Monkey, New York-based firm Melvin Capital Management is a leading shareholder in Coty Inc. (NYSE:COTY), with 42 million shares worth more than $442 million.
In its Q3 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Coty Inc. (NYSE:COTY) was one of them. Here is what the fund said:
“Coty Inc. (NYSE:COTY) 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. (NYSE:COTY) should also benefit from an accelerating growth trend in its prestige fragrance business driven by purchases shifting online and the category’s emerging popularity.”
8. Yum! Brands, Inc. (NYSE:YUM)
Number of Hedge Fund Holders: 36
Yum! Brands, Inc. (NYSE:YUM) owns and runs quick service restaurants. It is one of the favorite restaurant stocks on Wall Street. At the end of the fourth quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $811 million in Yum! Brands, Inc. (NYSE:YUM), compared to 38 in the preceding quarter worth $757 million.
Some of the famous names that operate under the Yum! Brands, Inc. (NYSE:YUM) umbrella include KFC and Pizza Hut, among others. Both these franchises have extensive presence in Russia and have faced calls to withdraw from the Russian market as the war in Ukraine drags on. So far, the company has suspended investments and new restaurant openings in Russia. The status of existing franchises in the country and their future remains uncertain.
7. Bunge Limited (NYSE:BG)
Number of Hedge Fund Holders: 38
Bunge Limited (NYSE:BG) is an agribusiness and food company. One of the primary sources of revenue for the firm is its wheat business. Amid the Russian invasion of Ukraine, wheat supplies from the Black Sea have been halted, driving a massive rally in the price of wheat that has benefited the company. Since Russia is one of the largest exporters of wheat, nearly 30% of the wheat supplies worldwide have been affected.
Major hedge funds remain bullish on Bunge Limited (NYSE:BG) stock. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Candlestick Capital Management is a leading shareholder in Bunge Limited (NYSE:BG), with 1 million shares worth more than $95 million.
6. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 41
Shell plc (NYSE:SHEL) is an energy and petrochemicals firm. As energy prices surge, hedge funds have been loading up on the stock. At the end of the fourth quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in Shell plc (NYSE:SHEL), up from 33 in the previous quarter worth $2 billion.
Shell plc (NYSE:SHEL) has faced calls to halt oil exports from Russia in the wake of the Ukraine invasion. As the US considers banning Russian oil exports, the company has said that it will continue to buy Russian oil but will donate the profits to a charity for victims of the war in Ukraine. This announcement has not been well-received by social media users.
Along with McDonald’s Corporation (NYSE:MCD), Spotify Technology S.A. (NYSE:SPOT), and Pioneer Natural Resources Company (NYSE:PXD), Shell plc (NYSE:SHEL) is one of the stocks that hedge funds have their eye on.
In its Q3 2021 investor letter, Goehring & Rozencwajg Associates, an asset management firm, highlighted a few stocks and Shell plc (NYSE:SHEL) was one of them. Here is what the fund said:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Shell plc (NYSE:SHEL) must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell plc (NYSE:SHEL) spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell plc (NYSE:SHEL) pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell plc (NYSE:SHEL) has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
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Disclosure. None. Sanctions on Russia Are Affecting These 10 Stocks is originally published on Insider Monkey.
