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2022/03/02 / Erste Group Research

Focus on LNG and commodity stocks

Russia's war of aggression on Ukraine continues. The EU/USA and Russia have responded with initial economic sanctions. As there is no sign of any military withdrawal by Russia, the EU/USA could respond with further sanctions (especially in the gas sector). This and the already existing, very high legal uncertainty for companies producing in or selling to Russia makes stocks with high exposure to Russia unattractive at the moment. One also has to be very selective about companies that are negatively affected by the increased commodity prices. Companies with high energy costs should also be avoided. The new geopolitical situation is very difficult to assess.

The valuation of the global equity market by P/E ratio has fallen (P/E ratio 2022e: 16.7x), but new entry points only appear to make sense if volatility falls at the same time. For the time being, this is not the case. In the long term, reduced dependence and diversification from Russian energy is a safe bet. We therefore recommend companies producing liquefied natural gas (LNG) or natural gas in the U.S. or Europe outside of Russia.

Rating changes: Deutsche Post, Sika, Cheniere Energy, Freeport-McMoRan.

Coverage discontinued: Aptiv, Continental, Gilead Sciences, Zalando.

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General information

AuthorErste Group Research
Product nameRecommendation List
Topic in focusEquities
Economy in focusEurozone, Germany, United States
Currency in focusEuro, US Dollar
Sector in focusAutomobiles & Parts, Banks, Basic Resources, Chemicals, Construction & Material, Financial Services, Food & Beverage, Health Care, Industrial Goods & Services, Insurance, Media, Oil & Gas, Personal & Household Goods, Retail, Technology, Telecommunications, Travel & Leisure, Utilities