A Steely Way to Invest in Russia

By Oxford Club Research Team | April 30, 2007

The ADR Alert
Monday, April 30, 2007
By Alexander Green, Investment Director

Email – #157

** A Steely Way to Invest in Russia

The last time we invested in a Russian company (VimpelCom), we locked in a gain of 47.12% on the shares and as much as 962% on the options.

Today, I’m excited about the prospects for another Russian company: Mechel (NYSE: MTL).

We all know that Russia’s great economic strength is in natural resources. Mechel is one of Russia’s leading mining and metals companies, with major interests in coal, iron ore, nickel, and steel. Its steel division also manufactures hardware and other finished products.

Earlier this month, Mechel released operational results for the first quarter. The company is growing strongly across almost every division. Coal production is up 13%. Nickel is up 22%. Coke is up 82%. Steel is up 9%. And rolled products are up 19%.

And the company is expanding into utilities too. Last month, Mechel announced that it will pay $265.5 million for the Southern Kuzbass Power Plant. Mechel will run the plant using 1.2 million tons of its own steam coal each year.

With the company experiencing heady revenue growth (sales are up 46% year over year), Mechel is set to deliver a big jump in earnings this year.

The company is a great value, too. The stock currently sells at just 8 times prospective earnings and will pay nearly 9% in dividends over the next 12 months.

***Action to Take***

Buy Mechel (NYSE: MTL) at $33 or better. And place a sell stop at $25 for protection. Speculators may want to take a look at the October 2007 $35 calls (MTL-JG). But don’t pay more than $1.90.

I’m going to be traveling through Italy next week on The Oxford Club’s Grand Tour. For this reason, you’ll receive your next broadcast of The ADR Alert the following week. In the meantime, my research assistant Chris Matthai will alert you if anything needs to be brought to your attention.

If you have any questions, feel free to call one of our VIP Trading Services representatives at 888.570.9830 (toll-free) or e-mail: viptrader@oxfordclub.com , or contact Pillar One Advisor Greg Galloway or Rick Pfiefer at 800.438.3040 or 407.667.4729.

All ADR Trader Alert recommendations will be posted on The Oxford Club’s website. Simply go to http://www.oxfordclub.com and click on “ADR Trader Alert.”

Stock

Country

Current Price

Comments

Mechel (NYSE: MTL)
Russia

New

Buy at $33 or better. Place a sell stop at $25.

Elbit Systems (Nasdaq: ESLT)
Israel
$40.95
Buy. Sell stop is $35.

AerCap Holdings (NYSE: AER)
Netherlands
$29.19
Buy. Sell stop is $25.

Ctrip.com (Nasdaq: CTRP)
China
$71.66
Buy. Sell stop is $55.

Deutsche Bank (NYSE: DB)
Germany
$154.40
Buy. Sell stop is $140.