Moscow, January 31 - “News. Economy". The total market capitalization of the 100 most valuable Russian public companies at the end of 2017 increased by 1.3%, to $643 billion.
Below we present the ten most expensive Russian companies.
The leading position in the ranking is now occupied by Sberbank, whose capitalization over the past year has grown by almost 40%, to $84 billion. The share of market capitalization attributable to financial sector companies increased over the year to 16.9% versus 15.8% in the previous rating, and their market value approached $110 billion.
At the end of last year, second place was occupied by the long-term leader, Gazprom, with a capitalization of $53.35 billion. Gazprom's capitalization decreased by 11%, but this still allowed it to slightly (by only $45 million) overtake Rosneft.
3. Rosneft
Rosneft, which in 2016 pushed the long-time leader Gazprom off the pedestal, was unable to maintain its first place in 2017 and took third place at the end of last year. This is explained by a decrease in Rosneft's capitalization by 24% over the year, to $53.3 billion.
Among the 100 most valuable companies, market capitalization increased in 55 in 2017, which is noticeably less than last year’s result (91 companies). In general, five companies had multiple capitalization growth in 2017, which in most cases was due to additional issues. For comparison, in 2016, 25 companies showed a multiple increase in capitalization, which was most often determined by the dynamics of shares.
The minimum market capitalization volume required to get into the top 10, on the contrary, became smaller over the year - $15.3 billion versus $15.9 billion a year earlier.
According to RIA Rating experts, in 2018, the growth of quotes for most companies, which began in mid-2017, is likely to continue. However, for many of them the low base effect has already been exhausted and growth should not be very strong.
As before, the largest contribution to total cost The most valuable companies in 2017 were contributed by corporations related to oil and gas production and oil refining. They account for 39.9% of the total capitalization of the Top 100 most valuable companies in Russia, which is 4.2 percentage points less than a year earlier. The reduction in share is associated with negative price dynamics for a number of largest companies from this sector.
The retailer Magnit and VTB left the list of the ten largest companies in Russia by capitalization. VTB moved from tenth place at the end of 2016 to 14th place at the beginning of 2018, which is due to a decrease in capitalization by 33%. U retail network Over the past year, Magnit's capitalization has decreased even more - by 39%, or $6.6 billion, which led to the loss of eight places in the ranking, and now this company is located in 16th place.
The third industry by total capitalization was metallurgy. On metallurgical companies accounts for 13.9% of the market value of the largest Russian companies by capitalization. In general, 2017 can be called the “year of metallurgists”, since following the prices for steel and coal, their stock quotes showed rapid positive dynamics.
Having some money savings, each of us thinks about how to not only save this amount, but also make a profit. One of the profitable options for investing money is a bank deposit.
This investment option does not require the active participation of the investor in the fate of the deposit and involves receiving a good interest income. An option such as capitalization will help increase the profitability of your deposit.
This term refers to the automatic addition of interest on a deposit to the principal amount at certain time intervals. Subsequently, interest is calculated on the increased amount.
Today, choosing a deposit program among dozens of banking offers is not easy, especially if the potential depositor does not have special knowledge in financial sector. In our article we will try to figure out how profitable it is to capitalize a deposit and when it is better not to choose this option.
What is capitalization?
Capitalization of a deposit is its periodic increase by adding already accrued interest. Interest on capitalization can be added to the principal amount of the deposit once a year, quarterly, month or even every day.
The more often this happens, the greater the benefit to the investor. This is due to the fact that the next amount of interest will no longer be accrued on the “naked” amount of the deposit, but on the amount + previous accrued interest.
Accordingly, each time, the amount of accrued interest increases in proportion to the increase in the amount in the bank account.
This deposit option allows the client to quickly accumulate money in the account, but usually does not provide the opportunity to withdraw interest or partially the principal amount of the deposit before the expiration date specified in the banking agreement. This is the main feature of deposits with capitalization - they are profitable when the investor does not plan to withdraw funds in the near future.
Compound interest formula
Capitalization of deposits in the banking industry is also called compound interest on the deposit. The formula to calculate compound interest looks like this:
- F.V.– future deposit amount;
- PV– today’s deposit amount;
- R– interest rate on the deposit;
- n– the number of periods in which the deposit is capitalized.
How to calculate interest on a deposit with capitalization?
To understand what capitalization of a deposit is and how interest is calculated, it is necessary to compare the conditions of a simple bank deposit and a program with capitalization.
A classic deposit assumes that interest on it will be accrued at the end of the period for which it was issued. For example, if a depositor places 100,000 rubles at 10% for a year, at the end of the year he will receive 110,000 rubles. The net profit for the investor in this case will be 10,000 rubles. The calculation of the return on the deposit will be calculated using the formula:
100,000 + 100,000 x 0.1 = 110,000 rubles
If we assume that the depositor withdraws only interest and leaves the principal amount on deposit for three years, it is obvious that his profit will be 30,000 rubles.
If the deposit provides a capitalization option, the formula will contain an additional parameter - the number of capitalization periods. For monthly capitalization of the deposit, this parameter will be equal to 12 (the number of months in a year). In this case, the return on the deposit for 3 years will be calculated using the following formula:
100,000 x (1+0.1/12) 12*3 = 134,818.2 rubles
This means that the investor’s net profit on the same deposit with capitalization will be 34,818.2 rubles, which is obviously more than in the first option. As the deposit amount and the period of keeping funds on deposit increase, the difference between the profitability of a classic deposit and a program with capitalization will also increase in favor of the latter.
Types of deposit capitalization
Depending on how often interest is added to the principal amount of the deposit, capitalization is divided into the following types:
- annual;
- quarterly;
- monthly;
- daily, etc.
Purely theoretically, capitalization can be hourly, every minute and even every second. However, Russian banks today are not ready to offer even daily capitalization, due to the difficulties of servicing such a deposit. Most often, clients are offered annual, quarterly and monthly interest capitalization.
Increasing the contribution with annual capitalization
Let's give a clear example. Let's say the deposit amount is 30,000 rubles. The interest rate on the deposit is 8%. To calculate the amount of annual capitalization, we use the formula:
For the year: 30,000*(1.08) = 32,400 rubles
Accordingly, net income will be 2,400 rubles. If we apply this formula to two and, accordingly, three years of annual capitalization, we obtain the following figures:
For two years: 30,000*(1.08)(1.08) = 34,992 rubles
For three years: 30,000*(1.08)(1.08)(1.08) = 37,791 rubles
Thus, using the annual capitalization scheme, the return on a deposit of 30 thousand rubles at 8% will be 7,791 rubles.
Increasing the contribution with quarterly capitalization
If we consider the same example with quarterly capitalization and use the formula presented above, it becomes obvious that profit will be calculated as follows:
For the year: 30,000* (1+0.08/3) 3*1 = 32,464 rubles
For two years: 30,000* (1+0.08/3) 3*2 = 35,131 rubles
For three years: 30,000* (1+0.08/3) 3*3 = 38,017 rubles
Obviously, quarterly capitalization is more profitable in comparison with the annual interest addition scheme.
Increasing the deposit with monthly capitalization
Now let's consider this example if the capitalization of the deposit is carried out every month. A simple calculation will present the following indicators of deposit profitability:
For the year: 30,000* (1+0.08/12) 12*1 = 32,490 rubles
For two years: 30,000* (1+0.08/12) 12*2 = 35,214 rubles
For three years: 30,000* (1+0.08/12) 12*3 = 38,107 rubles
This option becomes even more profitable for the bank client. Accordingly, the more often capitalization occurs, the more profitable this option of the deposit program is for the client.
Continuous capitalization
Based on the fact that frequent capitalization is beneficial for the investor, experts have developed a formula for continuous capitalization. It allows you to calculate what the maximum possible profit on a deposit with capitalization is if this process is carried out continuously. The formula looks like this:
- F.V.– future deposit amount;
- PV– today’s deposit amount;
- e= 2.7183 (exponent);
- r- nominal interest rate;
- n- number of years.
If we substitute the parameters of our example into this formula, where the amount of the initial deposit is 30,000 rubles and the annual interest is set at 8%, we obtain the following return on the deposit with continuous capitalization:
30.000*2.7183 0.08*3 =30.000*2.7183*0.24 =38,137 rubles
This formula demonstrates that continuous capitalization is the most profitable option for the investor. It is not yet possible to find similar offers in Russian banks, but most likely, in the future this formula can also be used when creating new deposit programs.
What is the effective interest rate?
The effective interest rate is an indicator that is calculated for capitalized deposits in order to compare them with the conditions of classic deposit programs.
So, for example, the interest rate on a deposit without capitalization in our example is 8%. If we consider the option with monthly capitalization, it was previously calculated that 32,490 rubles would be accumulated in the account over the course of a year.
To calculate the effective interest rate, divide this indicator by the principal amount of the deposit:
30 000/ 32 490 = 1,083
Accordingly, the effective interest rate on a deposit with monthly capitalization will be 8.3%, which is obviously higher than the 8% offered for a standard deposit. When calculating, you should understand that due to the capitalization of the deposit, the effective rate is always higher than the nominal rate.
Top offers from leading Russian banks
When choosing the most profitable deposit program, the depositor should pay attention to the tricks of banks. Thus, more profitable deposits with capitalization usually have a lower interest rate.
For example, if a regular deposit is offered by a bank at 10.5% per annum, and a deposit with capitalization at 10%, the benefit from the capitalization option is negated.
After a year, the client will receive the same amounts on both deposits, but a regular deposit program will allow him to regularly withdraw interest and withdraw funds, while a deposit with capitalization usually does not provide such opportunities.
Leading Russian banks in 2019 offer the following conditions for deposits with capitalization:
- Sberbank. This bank offers a huge variety of deposit programs. The minimum deposit size at Sberbank is only 1,000 rubles, and the term starts from six months. The interest rate for deposits with capitalization is relatively low - up to 8.1%.
- Summer Bank. The “Capital” deposit is considered a very profitable program with monthly capitalization at Leto Bank. The amount of such a deposit lies in the range of 5,000–1,500,000 rubles, and the rate ranges from 9.7 to 10.36%.
- Alfa Bank. The most popular Alfa-Bank deposits were the Pobeda and Life Line deposits. These programs provide monthly capitalization and offer interest rates of 10.25% and 9.8% respectively. The maximum period for placing funds under such deposit programs is 3 years.
- Home Credit Bank. This bank offers three profitable programs with monthly capitalization - “Profitable year”, “Maximum income”, “Pension”. Interest on such deposits ranges from 8% to 8.75% per annum, and the maximum period for placing money reaches three years. Home Credit Bank also offers a “Capital” deposit, in which the frequency of interest accrual is determined by the depositor himself.
- UniCredit Bank. This bank offers two profitable products with monthly capitalization - “For Friends” (can only be opened by new bank clients) and PRIME (for holders of a premium service package). Interest rates range from 6.50% to 9.00%. The advantages of this bank are that for many years in a row it has been in the TOP 10 in terms of reliability according to the Central Bank of the Russian Federation.
Deposits with interest capitalization are not uncommon in the modern Russian banking market. When choosing such a deposit, the client must understand that he will be able to experience all its benefits only if cash he won't need it anytime soon.
Apple or Google: which company will be valued at $1 trillion first?
Apple: at the finish line
The closest to the coveted trillion mark was Apple, whose capitalization as of February 6 was estimated at more than $821 billion. The company reported an absolute record of revenue of $88.3 billion in the December quarter - 13% higher than last year and more than $20 billion in net profit, which is 12% more than the result of 2016 and higher than analysts' forecasts.
Apple previously said it would pay $38 billion in taxes on foreign assets. However, the payment will have to be made for the current year, and therefore this did not affect the profit for the quarter. At the same time, the company's cash flow reached a record $285 billion.
The key issue in the report for the quarter, which ended on December 30, was the dynamics of iPhone sales. The iPhone X hit the market in early November 2017, and Apple's risky bet on a flagship smartphone starting at $1,000 could work both for and against the company.
The results were predictable: Apple sold 1% fewer devices than in the same period in 2016, but iPhone revenue was 13% higher due to higher average price.
According to Apple CEO Tim Cook, the iPhone X has been the company's best-selling smartphone since it launched in November. iPad sales increased by 6%, but revenue in the Mac segment decreased by 5%.
The total number of activated devices of the company exceeded 1.3 billion.
Active growth - by 13% - was again observed in sales of services (App Store, Apple Music, Apple Pay, etc.). In “other products,” which the company includes the Apple Watch, revenue increased by 36%. In the same segment, Apple will report on sales of the Homepod smart speaker, which it launches on the market in February.
However, the company's conservative forecast for the current quarter disappointed investors. Revenue expectations of $60 billion to $62 billion were below market expectations of $65.44 billion. Against this background, the company's shares are trading around $160 per share - at the level of mid-October. If this trend continues throughout the quarter, it will slow down Apple's trillion-dollar ambitions.
Google: catching up
Apple's closest pursuer is its main competitor in the mobile market, Alphabet (Google's parent company). The company, with a current capitalization of $736.7 billion, has shown less stock volatility than Apple over the past five years. However, the results of the fourth quarter of 2017 hit Alphabet's stock - and here's why.
The company reported revenue growth of 24% compared to the same period last year to $32.3 billion, which was higher than market forecasts. But under the influence of the new tax law, the company lost about $9.9 billion in net profit. As a result, Alphabet's quarterly net loss amounted to more than $3 billion.
Immediately after the announcement, Class A shares lost about 4% of their value and continue to decline. Not only the lower-than-expected operating profit results had an impact, but also the size of investments in. The company also disclosed the revenue of its cloud services for the first time - Google Cloud and G-Suite generated $1 billion in the quarter, which is five times lower than, for example, the results of Amazon's AWS.
At the same time, Google's growing advertising revenues (plus 21.5% for the quarter), dominance in the search market and long-term investments in innovative projects, including self-driving cars, keep the company among the top contenders for a trillion-dollar capitalization.
Microsoft: quietly
Against the backdrop of bright announcements and statements from other technology giants, Microsoft remained slightly in the shadows in 2017. However, under the leadership of Satya Nadella, the company managed to build a strong b2b vertical and increase its share price by more than 46% over the year. Now the company's capitalization is estimated at $691.9 billion - for a trillion the result needs to be repeated.
For October-December 2017, the company reported revenue of $28.9 billion - almost 12 billion more than a year earlier and higher than market forecasts. However, the net loss amounted to $6.3 billion, due to tax payments of $13.8 billion. Without taking into account the tax burden, Operating profit grew by 10%.
The largest segment - consumer products - grew by only 2% to $12.2 billion. The largest growth was recorded in the gaming business - thanks to the Xbox One X, the company increased revenue here by 8%.
In the productivity solutions segment, where Office and LinkedIn are the flagship, revenue grew 25% to $9 billion.
"Cloud" solutions brought the company $7.8 billion - up 15% compared to the previous year.
On the way to a trillion, Microsoft will have to overcome the image of a “stalker.” During the conference call, questions arose about how the company intends to compete with Sony Playstation in the number of exclusive games available, and with Amazon Alexa in the popularity of its Cortana service.
Amazon: Breakthrough of the Year
If you look at how companies started in 2018, Amazon is leading the way so far. Over the past month, the company's shares have gained almost 17%, and its capitalization of $683.8 billion has come close to Microsoft. If the company manages to maintain its momentum until the end of the year, it has every chance of becoming a leader.
For the fourth quarter of 2017, Amazon reported revenue growth of 38% to $60.5 billion. Unlike Google and Microsoft, Amazon also reported net profit for the quarter of $1.86 billion - 2.5 times higher than last year's result.
Of course, unlike their “colleagues,” the specifics of Amazon’s business, like other online retailers, imply super-successful sales.
However, in addition to “exceeding expectations” (according to the company) sales of smart speakers with Amazon Alexa, the cloud services division of Amazon Web Services showed a big jump in revenue.
Revenue in this segment grew from $3.5 billion in the December quarter of 2016 to $5.1 billion in 2017.
Amazon calls the negative impact of the new tax on its business “insignificant.” At the same time, the company included $789 million in its financial report for the quarter, which it won due to a reduction in the federal corporate tax rate. In addition, about 62% of Amazon's sales come from the US - by comparison, Apple gets 65% overseas.
: on the halfway
Finally, the most obscure contender for a trillion among technology companies- . The company's current capitalization of $528.9 billion needs to be almost doubled.
Is it possible? In quarterly results, it reported a 47% increase in revenue to $12.97 billion, and a 20% increase in net profit to $4.27 billion.
The company noted that due to the new tax, it was necessary to pay an additional $2.27 billion in taxes in 2017, which affected the results of both the quarter and the entire year.
Despite finishing the quarter in positive territory, it unpleasantly surprised investors. The time that users spend daily on the social network has decreased by 5% or 50 million hours: the new policy regarding viral videos has had an impact. In addition, it lost some users in the USA and Canada.
Positives include a 43% increase in advertising rates and the fact that 89% of advertising revenue is generated through mobile. As a reserve, we have divisions with minimal monetization: WhatsApp, Oculus, Instagram. And the head of the company, Mark Zuckerberg, previously promised to look towards cryptocurrencies, although he has not yet announced specific plans.
Of course, it's not just technology companies that are in the race to reach the trillion dollar mark. However, their leadership in the list of the most valuable companies and the sharp ups and downs in this segment is what makes it so exciting to watch.
Cryptocurrency market capitalization and new opportunities
In the article “Changes in the rate of cryptocurrencies: reasons and factors,” we have already examined the general reasons for fluctuations in the rate of Bitcoin and the rates of other cryptocurrencies (altcoins), for example, LTC and ETH.
Now, having studied the events of 2017, let’s ask what trends particularly strongly determined their courses in practice.
Having looked in more detail at the events that contributed to the success of cryptocurrencies in 2017, let’s analyze what additional factors may contribute to the rise in prices for cryptocurrencies this year.
On December 13, 2017, the capitalization of the cryptocurrency market crossed the historical mark of $500 billion, and at the beginning of 2018, this market volume indicator continued to grow and exceeded $700 billion. At the time of writing, a correction was observed; market trends are clearly visible in the charts below.
The total capitalization of the cryptocurrency market and its changes in the period from January 2017 to January 2018 is shown in Chart 1.
Reasons for the growth of cryptocurrency market capitalization in 2017
The total capitalization of all cryptocurrencies more than tripled from mid-October to mid-December 2017. A significant increase in prices for cryptocurrencies was predicted in advance, and identifying its reasons after the fact is not difficult. According to experts, many of these reasons will remain relevant in 2018.
Growing general interest in cryptocurrencies
Indeed, the general increase in interest in Bitcoin, the increase in confidence in it on the part of large investors not only quite naturally led to an increase in the rate of BTC itself; this also improved the position of other dominant cryptocurrencies. We can say that in terms of reputation, Bitcoin, as the dominant cryptocurrency, pulled other altcoins with it like a locomotive, thus increasing their rate and contributing to the growth of capitalization.
Involvement of large corporations in the cryptocurrency market
Direct improvement in the business climate, including around the most promising altcoins, was and remains important for the popularization of cryptocurrencies. Thus, the news about the establishment of a partnership between Microsoft Corporation and the Ethereum Foundation led to an immediate increase in the quotes of the ETH cryptocurrency.
Increasing the role of cryptocurrencies in various sectors of the economy
Improving the software mechanisms for the operation of Bitcoin and, especially, altcoins, endowing them with new functions and expanding their role in the banking sector and other sectors of the economy - all these factors also contributed to the rise in price of cryptocurrencies and a further increase in demand for them. Thus, the successful introduction of the SegWit update on Litecoin in the spring of 2017 led to an increase in the price of this asset by 6-7 times only in the spring months (the rate increase continued later).
Growing trust in cryptocurrencies and the possibilities of using blockchain technology
Blockchain technology, which is the basis of cryptocurrencies and, first of all, Bitcoin, is becoming increasingly widespread in the world. The possibilities for using this technology in practice are expanding; its uniqueness and importance for the development of the IT sector have been recognized at the state level in many countries.
Thanks to this, blockchain technology began to be used in government and international projects in 2017. “The technology of the future,” as blockchain is often called, according to many analysts, will become the basis for global business.
Such trends, of course, also increase the level of trust in cryptocurrencies, which have become a striking example of the implementation of blockchain technology in practice.
Cryptocurrency entering traditional exchanges
The increase in the “legality” of cryptocurrencies, increased trust in them from regulators and the entry of Bitcoin on traditional exchanges also contributed to the strengthening of the position of altcoins.
To learn about what a futures contract is and why it became the basis for BTC’s entry into global stock markets, read the article from EXMO experts “Bitcoin futures: what’s the point?” The advantages and disadvantages of Bitcoin futures can be found in the material “Bitcoin Futures: Features and Prospects”.
The arrival of large investors on the market and speculative influences
In 2017, large investors showed great interest in purchasing cryptocurrency, which stimulated an increase in the rates of the most popular coins, primarily Bitcoin. The speculative component of price growth also took place in the past year – it was signaled by periods of particularly rapid growth in the prices of many cryptocurrencies.
Depending on behavior major players on cryptocurrency exchanges and a number of other factors, the rates of leading cryptocurrencies may stabilize in the foreseeable future (possibly with a “correction”).
Of course, too rapid and unstoppable growth, such as the one we have recently observed, strengthens the speculative components of cryptocurrency prices, threatening cryptocurrency rates not only with a serious decline in the final segment with growth, but also, possibly, with a long-term price depression following it.
Prospects and opportunities of the cryptocurrency market
The growing market provides favorable prospects for both experienced traders and those new to cryptocurrency.
Bull traders (that is, buying an asset during price declines and selling during price ups) see the advantage of a growing market in that when entering the market at the wrong point (when the purchase of an asset is followed by a local decrease in price, instead of the expected increase), there is enough high chances of waiting for the price to recover and rise within a reasonable time frame.
For novice traders just getting acquainted with cryptocurrency, the good thing about a growing market is that getting acquainted with cryptocurrency occurs in an atmosphere of price optimism, which provides beginners with a certain psychological stability.
It is important to understand that growth cannot be endless, so you need to assess the market situation calmly and carefully. This is one of the main rules of working in the cryptocurrency market.
Read about what mistakes you should not make in trading in the article “10 Trader Mistakes. How to avoid them?
Of course, along with the possibility of the emergence of “corrective” trends, we can also expect the development of favorable trends in the market. According to some forecasts, 2018 could be the “year of altcoins”, providing them with opportunities for growth.
Trends in the altcoin market are well demonstrated by Chart 2. It shows changes in the total capitalization of the altcoin market, i.e. all cryptocurrencies except BTC between January 2017 and January 2018.
Market trends could not but affect the development of the EXMO cryptocurrency platform. The exchange team summed up the results of the past year. Thus, in 2017, more than 1,000,000 users were registered on the platform, and the number of active traders per day exceeded 100,000 people. The number of currency pairs available on the platform was also increased in 2017 from 13 to 46.
Event horizon: how the cryptocurrency market grew in 2017
2017 has come to an end, which undoubtedly turned out to be one of the most successful for the entire crypto industry. It turned out to be extremely eventful: many cryptocurrencies grew exponentially, there was a real ICO boom, and on the Internet people began to be interested in Bitcoin much more than Justin Bieber and even Donald Trump.
It’s time to take some stock and find out which coins have grown the most dynamically, how much the market has grown as a whole, what the situation is with Bitcoin volatility, and what forecasts experts make for the next year.
Market capitalization
The question of the economic meaning of the concept of “capitalization” is one of the most controversial. On the one hand, the capitalization of a cryptocurrency is the product of its supply by the current weighted average price of the coin. On the other hand, each digital asset has its own emission volume and its own monetary policy, and therefore comparing some coins with others in terms of capitalization is a rather controversial idea.
Nevertheless, in our opinion, it is possible and even necessary to analyze the dynamics of capitalization of the cryptocurrency market as a whole. So, some coins appear, while others disappear without a trace or drop in price to indecently low values. However, the total value of the market as a whole is growing, and this must be taken into account.
At the very least, this means that more and more people are interested in cryptocurrencies and are entering this market, increasing its capitalization. The price depends on demand, which means that if there was no widespread interest in cryptocurrencies, then the capitalization of digital assets would not grow so dynamically.
In 2017, new cryptocurrency hedge funds appeared like mushrooms after rain. Largely thanks to futures on the CME and CBOE exchanges, even the most “hardened” giants, such as Goldman Sachs and JPMorgan, began to pay attention to Bitcoin.
Those who previously “threw mud” at Bitcoin now take it into account and no longer throw around cliched phrases about “financial pyramids” and “nothing backed”, and do not perceive cryptocurrency only as a “tool for laundering criminal proceeds.”
So, if on the first day of 2017 the total capitalization of the cryptocurrency market was only $17.7 billion, then by December 29 this figure reached $592 billion.
Data: Coinmarketcap
Thus, over the year the market has grown approximately 33 times. This suggests that a well-diversified and balanced portfolio of cryptocurrencies formed at the beginning of the year would bring good profits to its owner.
This year, the first cryptocurrency also grew rapidly in price. A logical question arises: what is more profitable - holding Bitcoin or investing in a portfolio of carefully selected cryptocurrencies?
How did Bitcoin grow in 2017?
This year was perhaps one of the most successful for “digital gold”. The development of infrastructure, the interest of institutional investors and the general public, the implementation of SegWit and the legalization of Bitcoin in Japan are just some of the main factors in the growth of the price of the first cryptocurrency.
If on the first day of the outgoing year Bitcoin crossed the $1,000 mark for the first time since 2013, then by mid-December it was actively testing the $20,000 mark. At the time of writing (12/29/2017), “digital gold” is trading around $14,500 ( Bitfinex exchange).
Data: Coinmarketcap
The graph below illustrates how much Bitcoin has grown in percentage terms over the past six months, one year, two years and five years:
Data: CoinDance
Thus, tightly limited supply and exponentially growing demand work wonders.
If we compare the growth dynamics of the market as a whole and the price of Bitcoin, then in percentage terms the indicators will be quite comparable. Therefore, in a portfolio balanced in terms of risk/return ratio, a significant share may well be allocated to Bitcoin.
The thesis that Bitcoin has the highest Sharpe ratio among all cryptocurrencies is confirmed in the infographic taken from woobull.com:
Many well-known economists and old-timers of the financial market criticize Bitcoin for its high volatility. However, after studying the following chart, we can come to the conclusion that over time the average range of fluctuations in the price of Bitcoin is decreasing:
Bitcoin is now much more liquid than before, and its volatility is not much higher than many commodities and popular fiat currencies.
Now fewer and fewer people doubt that the first cryptocurrency is an attractive investment object. On the other hand, the crypto enthusiast does not live by Bitcoin alone. Many will be interested in learning how the most liquid altcoins grew in 2017, so that they can then probably include them in their crypto portfolio.
Record-breaking growth among altcoins
According to the blocklink.info service, the absolute record holder for price growth is the Ripple cryptocurrency (XRP), which grew by more than 24,000% over the year (last column of the table):
Data as of December 29, 2017
It is also clear from the table data that the cryptocurrencies DASH, Ethereum and Litecoin grew significantly (albeit with a large lag behind XRP) in 2017. These digital assets can already be considered “old-timers” of the market, because they are traditional regulars at the top of the Coinmarketcap rating.
It is also worth noting an interesting detail - the cryptocurrency market as a whole (indicated in the table as “CryptoCurrencies”) grew more actively than Bitcoin (3092% versus 1397%). Monero and Ethereum Classic also showed very good dynamics in 2017.
Among other things, data from the Blocklink service confirms that investments in cryptocurrency are currently many times more profitable than investments in shares of the largest companies, including Alibaba, PayPal, Amazon, etc.
One of the “latest discoveries” on the market is the Verge cryptocurrency (XVG). Back in early December, the price of one XVG coin did not exceed $0.006, and today the weighted average exchange rate is $0.16.
Is it too late to enter this market now?
Many experts believe that the growth limit for Bitcoin and other liquid cryptocurrencies is still far away. In particular, Fundstrat Global Advisors analyst Tom Lee is confident in the long-term prospects for market growth. His fund regularly buys bitcoins on price pullbacks, and Lee himself predicts a retest of the $20,000 level in mid-2018.
A less conservative forecast for Bitcoin is given by investor and billionaire Mike Novogratz. He is sure that by the end next year“digital gold” will cost $40 thousand. The investor believes that the Ethereum cryptocurrency can grow approximately three times more.
The long-term forecast of the head of Standpoint Research, Ronnie Moas, is interesting. He believes that thanks to a “breathtaking imbalance of supply and demand,” Bitcoin could soar to around $400,000.
Moas compares Bitcoin to Amazon shares, which over the past 15 years should have been “held” and bought “at the bottom.”
In August, he suggested that the total capitalization in ten years could grow to $2 trillion.
Chamath Palihapitiya, owner of the Golden State Warriors basketball club and founder of the venture capital firm Social Capital Partnership, is convinced that the current price of Bitcoin has not reached its limit. In three or four years, he believes, Bitcoin will be bought for $100,000, and in 20 years it could be worth a million dollars. At one time, Palihapitiya bought Bitcoin for $100.
Bitcoin billionaires, the Winklevoss brothers, are completely confident that BTC is capable of growing another twentyfold and even replacing gold. Despite the multiple growth since the beginning of the year, the twins believe that Bitcoin is only at the beginning of its “big journey.”
Breadwallet co-founder Aaron Lasher gives a very bullish forecast for the cryptocurrency market. He believes that in ten years the capitalization of Bitcoin alone will reach five trillion dollars. At the same time, he urges crypto investors not to let their guard down, since along with the bulls there are always bears who can put severe pressure on the market.
Also, according to Lasher, cryptocurrencies can serve as useful portfolio diversification tools, hedging tools and/or assets with high growth potential and associated risks. It all depends on the investor's financial goals.
Among the experts there are always pessimists, who can often pass themselves off as “realists”. Thus, at the beginning of December, Saxo Bank published its traditional list of provocative and shocking forecasts for 2018.
It notes that at some point in 2018 the price of Bitcoin will exceed $60,000. However, analysts are confident that soon some countries will “cut the ground from under Bitcoin.”
As a result, by the beginning of 2019, “digital gold” will fall in price to $1,000.
Unlike Saxo Bank, cryptocurrency fund Blocktower Capital appears to be much more optimistic. A clear confirmation of this thesis can be seen in the fund’s purchase of a call option for 275 bitcoins at $50 thousand at the end of December 2018. The option premium paid was one million dollars.
Perhaps, many also remember the forecast of the eloquent crypto enthusiast and CEO of MGT Capital Investments, John McAfee. In July, he promised to “eat his penis on TV” if the price of Bitcoin did not reach $500,000 in three years.
Just a few months later, McAfee upped the ante, admitting that “digital gold” would be worth a million dollars in 2020. Thus, the creator of the McAfee antivirus showed himself to be a convinced and courageous Bitcoin maximalist, who considers the first cryptocurrency to be the best long-term investment.
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History of Gazprom's capitalization: dynamics by year
PJSC Gazprom is one of the largest energy companies in the world, engaged in the full cycle of exploitation of natural resources: exploration, production, transportation, processing, storage and sale. The organization is interested in two types of fuel:
- Oil (included in the TOP-3 oil producing enterprises in Russia);
- Natural gas and gas condensate(the concern owns 17% of global gas reserves and 72% of Russian ones).
In the future, the above figures will likely increase, since gas fields are currently being actively developed in many regions of Russia and in other countries of the world.
The company develops and alternative sources energy, however, this direction is secondary in nature and is left to subsidiaries Gazprom.
Servicing such capacities would be impossible without an extensive network of gas pipelines with a total length of more than 170 thousand kilometers.
Until 2013, the organization remained the only exporter of gas from the Russian Federation, however, today this kind of monopoly has been preserved only in relation to pipeline gas.
In addition to the energy sector, the concern has many subsidiaries and controlled companies, the most famous of which are Gazprombank and Gazpromneft.
History of share capital
Gazprom was founded in 1990 through the transformation of the ministry gas industry USSR into a single state enterprise. The concern was headed by Viktor Chernomyrdin, who essentially retained his previous post (before that he headed the above-mentioned ministry).
The subsequent collapse of the Soviet Union had a negative impact on the company, since the collapse of the USSR meant the loss of property (pipelines, processing stations, sources of raw materials) that was located in the territories of the remaining Soviet republics.
However, despite financial difficulties, until the end of August 1992, Gazprom was completely owned by the state.
On November 5, 1992 the company was reorganized into Joint-Stock Company, and in April 1994, along with market reforms in the Russian Federation, privatization began. According to the organization's charter, foreign citizens could have a total of no more than 9% of shares.
The bulk of the shares were sold in 1998-2000, when Gazprom was faced with demands to pay billions in tax arrears. By 2004, only 38.7% of the shares remained in the hands of the state.
In the course of a number of transactions, this figure increased to 50.01%, and in December 2005 the State Duma adopted a law that established the minimum state share at 50% plus one share; foreign holders were allowed to own 20% of the company's shares (this restriction was later removed).
As of December 1, 2017, 50.23% of shares are controlled by the Russian Federation (owned directly or state corporations), 26.86% are owned by the owners of ADRs (American Depositary Receipts), 22.91% are the property of other registered persons. The organization's securities are traded on various exchanges (Moscow Exchange, London Exchange, etc.).
Dynamics by year
Gazprom capitalization by year, in billion dollars:
The growth of indicators in the graph in 1997-98 is mainly due to tax breaks and state patronage, which the company received thanks to the appointment of Viktor Chernomyrdin to the post of Chairman of the Russian Government. His resignation in 1998, as well as the economic crisis, seriously affected the concern’s quotes.
The subsequent growth continued until May 2008, when capitalization rose to $364.8 billion. Around the same time, Gazprom Chairman of the Board Alexey Miller said that in 7-8 years capitalization should grow to 1 trillion. However, a number of factors (economic crisis, falling energy demand, image scandals, etc.)
) led to a sharp decline and depreciation of the holding.
Due to the fact that the dependence of European consumers on Russian gas has not gone away, the company has gradually restored its position. But the growth in value was modest and at a new peak in the spring of 2011, the concern was far from pre-crisis indicators.
Then there was a steady decline again, and in 2014 there was a sharp collapse in quotations due to the conflict in Ukraine. Having previously imported large volumes of gas, Kyiv has sharply reduced its consumption of Russian energy resources.
The company was also hit by the introduction of sanctions, since Gazprom, in addition to pursuing its commercial interests, is also an instrument of foreign economic and foreign policy influence of the Russian Federation.
Gazprom capitalization today
At the beginning of December 2017, Russia’s “national treasure” was valued at approximately $53.5 billion. In comparison with optimistic forecasts about “capitalization of 1 trillion,” the result is more than modest. However, there is no point in burying the gas giant prematurely - such low figures are a standard story for Russian companies, many of which are significantly undervalued.
For example, Apple is valued at 18 times more expensive than Gazprom, but at the same time its EBITDA (pre-tax profit) is only 1.5 times less. That is, an American corporation, while earning not much more, has an exorbitant cost in comparison with a Russian concern.
In addition, Gazprom has undeveloped reserves worth $10 trillion (and these are only confirmed ones), the company's shares have a good dividend yield (6.5% versus 3.5% for foreign peers), and the return on capital is much higher than the average by industry (5.9% versus 3%). There is a clear underestimation of the Russian company due to a number of reasons:
- Unattractive investment climate;
- Unstable national currency (Russian ruble);
- Low efficiency of Gazprom's investment activities.
Against the backdrop of all of the above, talk about the possible bankruptcy of the gas concern is mostly groundless. Even taking into account multibillion-dollar investments in new projects and not the most far-sighted pricing policy, the company does not face any financial turmoil in the near future.
If Gazprom ever goes bankrupt, it is natural that this will result in negative consequences for many citizens of the country. Today the corporation provides 400 thousand jobs and supplies almost the entire population and enterprises of the Russian Federation with gas. Hence, a large number of people will be left without work, and gas prices will skyrocket.
It is also worth noting that the state budget of the Russian Federation is significantly tied to the work of the concern (the company’s income provided 8% of the country’s GDP). Therefore, bankruptcy would seriously affect both the general welfare of the state and the stability of the economy as a whole.
Analysts' forecasts
Experts suggest that Gazprom's market capitalization is unlikely to increase significantly in the coming years, since the company simply does not have the appropriate resources and leverage.
As mentioned above, there is a serious undervaluation of Gazprom on the market, however, given the current foreign policy situation, the situation in this area will not improve in the near future.
Factors that discourage potential investors (state intervention in the activities of the gas corporation, economic sanctions, political problems) will remain relevant for a long time, and therefore there is no point in expecting much progress.
This will require a significant qualitative breakthrough in the field of innovation and technology. It will not be possible to achieve imaginary growth, as, for example, in the situation with Apple, since Gazprom represents the real sector of the economy.
In fact, even in incredible scenarios (for example, in the case of a several-fold depreciation of the dollar and a subsequent increase in the attractiveness of energy resources from the Russian Federation), strong growth in “national treasure” shares is unlikely. After all, such shocks, as a rule, affect the entire global economy, significantly reducing the overall demand for energy resources.
However, many analysts are confident that a slight increase in Gazprom stock prices is still quite possible. The reason for this should be the previously mentioned undervaluation of the company, as well as the planned increase in selling export prices in the European direction.
Gazprom projects
In 2017, the gas giant actively invested in future projects. Conventionally, they should be divided into two groups: the development of new fields and the construction of gas pipelines. The first category includes the following programs:
- The Yamal megaproject is the construction of a gas production center on the Yamal Peninsula, which in the future will become the main source of energy in Russia. Already, 67.5 billion cubic meters are produced there. m. of gas. In the future, it is planned to increase this figure to 360 billion cubic meters. m. of gas per year.
- The Eastern Gas Program is a state project to create a unified system of gas production, processing and transportation in the east of the country. At the moment, work is underway to launch four gas production centers: the Kovyktinskoye and Chayandinskoye fields, Kamchatka and Sakhalin-3.
- LNG projects involve the construction of liquefied gas production plants in the regions natural gas(“Sakhalin-2”, “Vladivostok-LNG”, “Baltic LNG”, “Kaliningrad-LNG”).
To transport the huge volumes of gas that will be supplied by the fields listed above, Gazprom is building three large gas pipelines at once:
- “Power of Siberia” is a modern transportation system in eastern Russia, the planned length of which is 3000 km. Some sections of the gas pipeline will pass through hard-to-reach natural routes (permafrost, mountain ranges, wetlands and seismically active areas).
- Nord Stream 2 is an export gas pipeline from Russia to Europe passing through the Baltic Sea. It will allow increasing the volume of Russian gas supplies abroad. The length of the new route is 1200 km.
- Turkish Stream is a gas pipeline from Russia to Turkey passing through the Black Sea.
The goal of the project is to expand gas export channels to Turkey and Southern Europe.
Based on all of the above, we can conclude that any significant changes in the capitalization of Gazprom towards growth or decline are unlikely. The rise in the company's value is hampered by the concern's weak investment attractiveness and a number of foreign policy factors. At the same time, the corporation itself never took any deliberate actions to increase capitalization.
On the other hand, the demand for Russian gas from Europe will not go away for many years (there is simply no alternative yet), and all emerging conflicts do not significantly affect supply volumes. Therefore, there is no need to seriously talk about a decline in Gazprom’s quotes, much less bankruptcy.
"I cited figures from which it was possible to see that in Russia, mainly pensions, education, medicine, the army and other officials are financed by state-owned companies, their subsidiaries, as well as numerous budgetary institutions, which together control 70% of the Russian economy. They are mainly a source of replenishment of the Russian Federation budget. Individuals in the Russian Federation form approximately 10% of the budget, while in the United States this share is approximately 64%.
Below we will see how the capitalization of the most expensive Russian companies has changed in recent years:
| Company | Share controlled by the state, % | Owners | Change in capitalization in $ per, % | Change in capitalization in $ from 2014 to 2017. ,% | Capitalization at the end of 2017, $ million | ||
|---|---|---|---|---|---|---|---|
| 2017 | 2016 | 2015 | |||||
| Sberbank | 50% + 1 share | *Central Bank of the Russian Federation - 50% + 1 share; * the remaining shareholders are more than 8273 legal entities and individuals ( individuals- 2.84%, foreign investors - more than 45%) | 37,9 | 104,1 | 44,9 | 307,83 | 84 311 |
| Gazprom | more than 50% | * Rosimushchestvo - 38.37%; * OJSC Rosneftegaz* -10.97%; * OJSC Rosgazification* -0.89%; *ADR holders - 25.20%; *other registered persons -24.57% | -11 | 35,4 | -20 | -3,60 | 53 349 |
| Rosneft | 50% | *JSC Rosneftegaz - 50%, *British BP - 19.75%, *Swiss-Qatari consortium QHG Oil Ventures - 19.5% | -23,7 | 87,7 | 1,2 | 44,93 | 53 304 |
| Lukoil | h | 1,9 | 75,1 | -18,1 | 46,13 | 48 933 | |
| NOVATEK | h | -9,4 | 58,1 | 5,4 | 50,97 | 35 543 | |
| Norilsk Nickel | h | 12,6 | 31,5 | -13,2 | 28,52 | 29 511 | |
| Gazprom Neft | 95.68% Gazprom | *Gazprom - 95.68%; *free float - 4.32% | 19,4 | 68,9 | -15,8 | 69,80 | 20 165 |
| Tatneft | h* | 18,8 | 58,4 | 6,2 | 99,85 | 17 959 | |
| Surgutneftegaz | h | -5,6 | 8,8 | 10,7 | 13,70 | 17 191 | |
| NLMK | h | 35,8 | 119 | -25,5 | 121,56 | 15 349 | |
| Severstal | h | 1,2 | 82,5 | -5,1 | 75,27 | 12 985 | |
| Yandex | h | 64,7 | 48,7 | -9,5 | 121,64 | 10 669 | |
| RUSAL | h | 62,7 | 41,2 | -54,4 | 4,76 | 10 569 | |
| VTB Bank | 60,90% | *Rosimushchestvo - 60.9%; *The remaining shares are distributed between GDR holders and minority shareholders - individuals and legal entities. | -33,1 | 12,4 | -7,4 | -30,37 | 10 595 |
| Pole | h | -25 | 84,5 | 123,9 | 209,82 | 10 482 | |
| Magnet | h | -38,9 | 17,8 | -12,8 | -37,24 | 10 382 | |
| X5 Retail Group | h | 16,4 | 71,2 | 51,6 | 202,10 | 10 256 | |
| ALROSA | 33% | *in free circulation - 34%; *RF - 33%. | -18,3 | 106,7 | -30,3 | 17,71 | 9 584 |
| MTS | h | 13,1 | 41,7 | -5,2 | 51,93 | 9 578 | |
| MMK | h | 34,7 | 115,2 | 35,8 | 293,65 | 8 210 | |
| En+ Group | h | - | 7 771 | ||||
| VEON | h | -1,2 | 17,4 | -21,5 | -8,95 | 6 685 | |
| Mail.ru Group | h | 57,5 | -13,9 | 37,7 | 86,73 | 6 360 | |
| Inter RAO | *PJSC FGC UES - 9.24%; * JSC Inter RAO Capital (quasi-treasury shares) - 29.39%; | *Rosneftegaz Group - 27.63%; *PJSC FGC UES - 9.24%; * JSC Inter RAO Capital (quasi-treasury shares) - 29.39%; *free float - 33.74%. | -7 | 317,8 | n.d. | 6 079 | |
| Uralkali | h | -25,4 | 11,4 | 5,7 | -12,16 | 5 966 | |
| Bashneft | Rosneft | The main shareholder is Rosneft | -33,8 | 117,2 | 24,1 | 78,44 | 5 793 |
| PhosAgro | h | 0,5 | 10,1 | 31,6 | 45,62 | 5 555 | |
| Megaphone | h | -6,9 | -18,7 | -21,5 | -40,58 | 5 503 | |
| EVRAZ | h | 41,4 | 152,8 | -54,8 | 61,57 | 5 470 | |
| RusHydro | 60.6%, VTB Bank (13.3%) | *Rosimushchestvo - 60.6%; *VTB Bank - 13.3%; *Aviatrans LLC - 6% | -8,5 | 66 | -2 | 48,85 | 5 373 |
| Polymetal | h | 17,1 | 25,4 | -3,8 | 41,26 | 5 298 | |
| UAC | 90,30% | *Rosimushchestvo - 90.3%; *Vnesheconombank - 5.6%; *private shareholders - 4.1% | 42,6 | 128,1 | 324 | 1279,15 | 4 899 |
| Moscow Exchange | Central Bank of the Russian Federation (11.779%), Sberbank (10.002%), Vnesheconombank (8.404%), RDIF Investment Management-6 (5.003%) | *Central Bank of the Russian Federation - 11.779%; *Sberbank - 10.002%; *Vnesheconombank - 8.404%; *EBRD - 6.069%; * “RDIF Investment Management-6” - 5.003%; * in free circulation - 57% | -7,6 | 61,1 | 17,8 | 75,35 | 4 315 |
| PIK Group | h | 13,2 | 62,7 | -10,2 | 65,39 | 3 654 | |
| FGC UES | 80.13% Rosseti | *PJSC Rosseti - 80.13%; *Rosimushchestvo - 0.59%; *minority shareholders -19.28% | -15,4 | 313,4 | 3 | 260,23 | 3 591 |
| Tinkoff Bank | h | 78,7 | 245,9 | -4,4 | 490,93 | 3 443 | |
| VSMPO-Avisma Corporation | h | 29,5 | 33,7 | 14 | 97,38 | 3 375 | |
| NK "Russneft" | h | 15 | - | 3 118 | |||
| Rostelecom | Previously: 48.71%, Vnesheconombank (4.29%) | *Rosimushchestvo - 45.04%; *Vnesheconombank - 3.96%; *Mobitel LLC (a subsidiary of Rostelecom) - 12.01% | -20,2 | 10,4 | -20,6 | -30,05 | 2 840 |
| "Rosseti" | 88,89% | *Rosimushchestvo - 88.89% | -23,1 | 261,7 | -15,8 | 134,20 | 2 839 |
| RIBBON | h | -29 | 21,5 | 12,9 | -2,61 | 2 835 | |
| "Unipro" | h | -6,8 | - | 9,5 | 2 795 | ||
| Acron Group | h | 14,7 | 14,3 | 56,4 | 105,04 | 2 733 | |
| "Aeroflot - Russian Airlines" | 61,17% | *Rosimushchestvo - 61.17%; *legal entities(including the subsidiary Aeroflot-Finance LLC - 5.13158%) - 34.04%; *individuals - 4.79%; *free float (ticker AFLT on the Moscow Exchange) - part of the shares. | -4,3 | 227,6 | 36,1 | 326,69 | 2 681 |
| Novorossiysk sea trade port | Previously: 50.1% shares - Novoport Holding Ltd. (JV Transneft and the Summa group), 20% belongs to Rosimushchestvo | *PJSC Transneft - 62%; *Rosimushchestvo-20%; *structures of JSC Russian Railways - 5%; *free float on the Moscow and London stock exchanges - 13% | 26,7 | 112 | 155,3 | 585,75 | 2 642 |
| state | -6,17 | 134,67 | 29,31 | 207,18 | 255 819 | ||
| private | 13,62 | 54,47 | 5,24 | 85,09 | 310 407 | ||
| public-private | 0,27 | 93,27 | 47,60 | 226,27 | 16 541 | ||
*h-private company
I included ALROSA, the Moscow Exchange, and the Novorossiysk Commercial Sea Port as public-private companies.
As can be seen from the table, from 2014 to 2017, the capitalization of state-owned companies in $ increased by an average of 207.18%, and of private companies by 85.09%.
1. UAC - 1279.15%
2. Novorossiysk sea trade port - 585.75%
3. Tinkoff Bank - 490.93%
4. Aeroflot - Russian Airlines - 326.69%
5. Sberbank - 307.83%
6. MMK - 293.65%
7. FGC UES - 260.23%
8. Polyus - 209.82%
9. X5 Retail Group - 202.10%
10. Rosseti - 134.20%
11. Yandex - 121.64%
12. NLMK - 121.56%
13. Acron Group - 105.04%
14. Tatneft - 99.85%
15. VSMPO-Avisma Corporation - 97.38%
16. Mail.ru Group - 86.73%
17. Bashneft - 78.44%
18. Moscow Exchange - 75.35%
19. Severstal - 75.27%
20. Gazprom Neft - 69.80%
21. PIK Group - 65.39%
22. EVRAZ - 61.57%
23. MTS - 51.93%
24. NOVATEK - 50.97%
25. RusHydro - 48.85%
26. Lukoil - 46.13%
27. PhosAgro - 45.62%
28. Rosneft - 44.93%
29. Polymetal 41.26%
30. Norilsk Nickel - 28.52%
31. ALROSA - 17.71%
32. Surgutneftegaz - 13.70%
33. RUSAL - 4.76%
UAC became the fastest growing company. Apparently this was facilitated by the introduction of advanced technologies industrial production. For example, the United Aircraft Corporation (UAC) has implemented the concept of virtual design bureau, when engineers from several design bureaus and production sites work on designing an aircraft model in a single digital environment.
, Apple, Google and Microsoft have recorded global leadership in their market value, with Facebook and Amazon completing the top five giant firms. For the first time, five tech companies are playing the role of stock market queens. Their joint capitalization increased by 11% over the past year and reached the equivalent of UK GDP.The iPhone maker, the most valuable company in the world, increased its value by 48% in 2017 and reached a capitalization of €713.8 billion. Alphabet grew by 30% to €604.7 billion, and the giant founded by Bill Gates rose by stock market by 40% and exceeded €547 billion. Thus, the capitalization of the most expensive trinity of companies is €1.8 trillion, which is comparable to Italy’s GDP. The basis of the success formula for the new generation of entrepreneurs, the elite of the global market, is a clear double common denominator: they are technologically advanced and have an American passport, and more precisely, they all come from Silicon Valley, a haven for startups. This is confirmed by the following fourth and fifth places in the ranking of the most valuable companies, occupied by Amazon with a capitalization of €467.3 billion and Facebook worth €427,019 billion.
For the first time, five Internet giants have won the global ranking. Even the sixth place belongs to the dot-com, albeit of Chinese origin, Tencent, valued at €409 billion. In general, China is a rapidly developing country in the stock market: Alibaba, which debuted on Wall Street only four years ago, is already worth €366 .2 billion and is in eighth position on the list.
Expanding the time horizon and analyzing a similar rating from ten years ago, the “occupation” of the stock market by technology giants seems more obvious. Microsoft is the only dot-com that was among the leaders in 2007 and was also in third position. The oil sector was king then: ExxonMobil, General Electric, PetroChina and Royal Dutch Shell, together with Microsoft, formed a large-cap quintet. Then you had to go down to position 70 to find Apple, which launched its first iPhone, with a market capitalization of €174 billion. Google was twenty-ninth with €219 billion. Amazon and Facebook have since shown even better value escalation: in 2007, there were 366 more valuable companies than Bezos, and social network Zuckerberg was not even rated because it was born 5 years later.
In 2017, black gold still has strength in the ranking, but outside the Top 10: the first oil company is ExxonMobil, but today it is in eleventh position with a value of €293.9 billion. In seventeenth place is Royal Dutch Shell with €233.8 billion, ahead of Chevron with €197.2 billion, occupying position 21.
There are no signs of change in the outlook for 2018, with Silicon Valley forecast to grow further. The stock market is expected to record a trillion-dollar value for the first time in history this year, although there are differences in forecasts about who will reach that milestone. Apple , but Amazon, whose shares rose 55% in 2017, and China's Alibaba are also targets of analyst bets.
The Russian concern displaced the American corporation ExxonMobil, which led this rating for 12 years. In addition to Gazprom, another Russian company made it into the top 10 of the S&P rating - (6th place). became 14th, Rosneft was placed in 22nd place.
Materials with the headings: “What sanctions? What sanctions? "Gazprom displaced ExxonMobil." The author of the article in Forbes notes that the first place of the Russian gas concern indicates the ability of its management to resist low prices for hydrocarbons and the ban on obtaining cheap loans in the West, and at the same time maintain a leading position in the European gas market, in which American companies are still trying unsuccessfully to gain a foothold. .
Let us recall that the United States recently passed a law on new sanctions against Russia. The financing period for Russian energy companies will be reduced from 90 to 60 days. The maximum financing period for Russian banks subject to sanctions will be reduced from 30 to 14 days.
A separate line was announced about opposition to the construction of the Nord Stream 2 gas pipeline, which is being carried out by Gazprom.
At the end of September, he announced November 28 as the date for introducing new restrictions on the financing of banks and companies in the Russian oil and gas sector specified in this law.
But there is one significant detail that darkens the joy of the success of the “national treasure”, which does not care about sanctions. Gazprom is a cheap asset. Alor Broker analyst Evgeny Koryukhin compared for Gazeta.Ru the capitalization of companies from the top ten of the S&P Global Platts rating.
In this top ten, Gazprom ranks only 5th in terms of capitalization. Moreover, the ExxonMobil corporation is worth almost 7 times more than Gazprom, and occupies only 9th place in the ranking.
The French one closes the top ten, but its capitalization exceeds Gazprom's by 2.6 times, the Chinese China Petroleum is 2 times more expensive, and the Indian Reliance Industries is one and a half times more expensive.
Evgeny Koryukhin notes that Gazprom’s proven gas reserves are worth more than $10 trillion (with an average gas price of $200 per 1 thousand cubic meters). For comparison, the proven hydrocarbon reserves of Exxon Mobil (the world's largest oil company) are estimated at just over $1.2 trillion (at an average oil price of $50 per barrel).
“Russian companies have been rated lower than their counterparts from developed countries for a long time. Even at the everyday level, we are accustomed to the fact that it costs as much as eighteen Gazproms. But at the same time, Gazprom’s EBITDA is only 1.5 times lower. Compare - it costs 18 times cheaper, and EBITDA is only 1.5 times lower,”
- says the deputy general director on development retail business IC "Veles Capital".
It is worth emphasizing that, naturally, not only Gazprom is undervalued, but also domestic companies from other sectors.
If we talk about the Russian market, then based on many fundamental and technical factors it looks undervalued, agrees the Alfa Capital analyst.
“If we compare the dynamics of Russian stock indices with developed and developing countries, then Russian ones, to a large extent, lag behind. But there are practically no prerequisites for this, since unemployment in Russia is one of the lowest in the world, GDP growth is more than 2%, and what is important is that company profits are growing,” he notes.
At the same time, if you look at Gazprom’s financial indicators and compare them with the indicators of competitors, then Gazprom obviously wins. The Russian company has a high dividend yield of 6.5%, while the average dividend yield of foreign analogues is 3.5%. If we talk about the P/E multiplier (price/earnings ratio - capitalization/net profit), then Gazprom has one of the lowest, 3.9, which indicates a strong underestimation of the company's market value relative to current profits.
For example, this indicator is 30, Exxon has 29, even 22. Return on capital is significantly higher than foreign analogues and is about 5.9% against the industry average of 3%. The same can be said about the return on invested capital.
At the same time, Evgeny Koryukhin recalls that before the start of the global financial crisis, in June 2008, Gazprom was worth $360 billion. And its capitalization did not lag behind the capitalization of Exxon Mobil so much - the gap was only about $50 billion. At that time, the company's management predicted growth of its capitalization to $1 trillion.
These plans were never destined to come true - oil and gas prices fell, bubbles in financial markets collapsed, and speculative money left Russian assets. And they never returned.
Today analysts say that the underestimation Russian market is chronic in nature and it is unlikely that the situation will be able to change much in the near future. There are several reasons for this. These include poor working conditions for foreign investors, an underdeveloped financial market, relatively low operating efficiency of the companies themselves, as well as instability course national currency.
“Investors are scared off by total state control over the industry, economic sanctions, not always obvious investment policies of companies and the quality of corporate governance,” says Artem Kopylov.
But perhaps the main factor is political problems. The confrontation with the West leaves virtually no chance that Gazprom or anyone else will become the leader in capitalization.
“I think that in order for Western investors to become more inclined to buy our shares, the political situation needs to significantly improve,” says Alexey Bushuev.
For investors to start buying securities of Russian companies en masse, it is necessary for them to believe that there will be no devaluation of the local currency, that Russia will not get involved in geopolitical conflicts in other countries, thereby incurring a wave of sanctions, that the government will be able to create conditions under which the economy will reach a GDP growth rate above 3% per year, lists Evgeniy Koryukhin.
To increase capitalization, Russian companies can only improve operational and investment efficiency, analysts say. Quotes can support programs for companies to repurchase their own shares, increase dividends, as well as a stable ruble exchange rate.
The chief analyst believes that an increase of 20-25% in Gazprom shares is quite possible. Firstly, due to the fact that the shares remain fundamentally undervalued, and secondly, due to the expected increase in selling export prices in the European direction this fall and an increase in purchase volumes.
But globally, the situation for Russian assets is unlikely to change in the near future, summarizes Alexey Bushuev.
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