Invest in Europe, the Smart Way
Joshua is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Europe is a heavyweight in the global economy, but the euro is suffocating the European Union. Spain's unemployment rate recently reached 26.9%, while Greece is at 27.2%. Even Germany's future is looking grim. Its export machine is slowing down with low growth forecasts in China and Europe. In the midst of the storm, Norway and Russia are exceptions to the rule with their own currencies and stronger outlooks.
Russia - The Ruble
In the West, Google and Bing dominate the search market, but in Russia Yandex (NASDAQ: YNDX) reigns supreme. For a number of years it has maintained more than 60% of the market. In the future its market share looks secure. The company is filled with Russian workers that have an intimate knowledge of the Russian language and market, an advantage against U.S. competitors like Google.
The shift from traditional laptops and personal computers to mobile devices is an unstoppable evolution. Only companies that are willing to evolve to a more mobile based world will prosper. As an emerging market with income constrained consumers, Russia is even more likely to opt for cheap smartphones and tablets over traditional computers.
Yandex has a number of products to help the company in the mobile sphere. It operates Yandex.Store, one of the largest alternative Android app stores. The company also has its own browser for Android smartphones and iPads that helps to drive traffic to its properties. With a profit margin of 30.4%, a return on investment (ROI) of 26.2% and a total debt to equity ratio of 0, Yandex is a European growth story with a profitable future.
Norway - The Norwegian Krone
Just like Russia, Norway has its own currency. The nation is heavily involved with the oil and gas industry through Statoil (NYSE: STO). The company has a lucrative access to the Europe's natural gas markets through long term contracts and its national oil fields.
Global warming has many downsides, but for Statoil it is a long term positive. The company's tight relationship with the government will give it quality access to new fields opening up along Norway's northern shores. The majority of the company's new projects are coming online in Norway and Angola, though it has a history in other countries like Brazil
With no-long term debt, a profit margin of 6% and a ROI 12.7%, Statoil is profitable like many of the world's oil majors. The company's decades of experience with offshore drilling in challenging climates will be an asset in the coming decades, as more exploration moves into the Artic.
Seadrill (NYSE: SDRL) is another company tightly involved with Norway. The firm leases drilling rigs to public and private companies. The growth in ultra-deepwater drilling has been a great benefit for Seadrill, as many firms prefer to lease these advanced ships than pay for them out of pocket and wait years for their delivery.
Mexico's decision to revamp its oil sector has also helped Seadrill's premium jack-ups. The company is not wasting any time, and it has orders for 19 new ships, including 10 jack-ups.
Unlike Statoil or Yandex, Seadrill's balance sheet is somewhat concerning. With a total debt to equity ratio of 1.78, Seadrill has more than twice the debt load of its competitor Transocean. As long as oil prices stay high and companies keep on drilling in hard-to-reach fields Seadrill will be fine, but if the market hits a downturn Seadrill will be forced to sell assets at low prices. Its high payout ratio of 115 only ads more concern. With a profit margin of 25.7% the company is fine for now, but its future is far from risk free.
Norway and Russia are not trapped by the euro's woes. Russia's Yandex has a strong future ahead of it, due to its superior market share, local appeal and proactive engagement in the mobile sphere.
Statoil enjoys government sponsorship and a wealth of technical knowledge that will help it as more exploration moves offshore. Seadrill offers a number of advanced drilling rigs that are in high demand, but its large debt load and high payout ratio bring the current and future responsibility of its management into question.
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Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Seadrill, Statoil (ADR), and Yandex. The Motley Fool owns shares of Seadrill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!