The Russian invasion of Ukraine has sparked a swath of economic sanctions on Russia including bans on its financial sector, halting commodity imports and even companies suspending operations and exiting their investments in Russia. This is having a direct impact on the Russian economy, and in addition to the uncertainties related to war and the events that could unfold, investors are naturally concerned about their portfolio’s exposure to Russia and surrounding regions. 

Here are some quick key facts about Russia to understand its importance in the global context:

• It represents about 3% of the world’s GDP (Compared to the US at 25% and Canada at 1.8%)
• Produces 10% of global oil supply
• Supplies 40% of Europe’s gas
• Oil and gas are about 60% of its exports       
• The Ruble (Russia’s currency) has fallen 30% in the last month

We have been getting many questions about certain companies and their exposure to Russia and surrounding regions so we thought it would be helpful to run a screen for our members. The idea behind this screen is to identify names that investors may consider reducing exposure to due to increased uncertainty. In addition, this screen may also generate ideas for buying opportunities to keep on one’s watchlist that might become ‘oversold’ due to any (even if minimal) exposure to Russia.

The screener below identifies 64 Canadian companies with risk exposure to Russia (in addition to one with exposure to Ukraine) using a scoring system from 0 to 1. We note that the score does not necessarily indicate revenue exposure only, rather, a mixed score based on a Refinitiv risk model comprised of four factors:

i) Revenue exposure by geography,

ii) Location of headquarters,

iii) Whether its stock is traded on a country’s exchange and

iv) The currency of financial reporting.

For simplicity, we can think of a score of “1” as being a company that has ‘100%’ exposure to Russia (fully operates in Russia with all revenues generated there and in Russian Ruble).

Here is the screener:

Readers may recognize many of the names on the list above. This is not surprising as companies that are well known often have an international presence. However, the main question for now is how much exposure do these companies have to Russia. While Russia is a significant economy on the world stage, North American companies in general do not seem to have high exposure to Russia. This makes sense due to various factors such as geographic proximity and political tensions. In contrast, North American companies with an international presence tend to have more of presence in western Europe (UK, France, Germany etc).

The reason we highlight this is that none of the companies in the list below are remotely close to having high exposure to Russia, with the greatest exposure held by Kinross Gold Corp (K) at ~12%. In fact over 75% of companies on this list have less than 1% exposure to Russia and about a third have less than 0.5%. We think this should help ease some of the worry about Canada’s exposure to Russia in general.

However, we would certainly watch things closely for companies with relatively high exposure to Russia like Kinross Gold (12%) and Calfrac Well Services Ltd (7%). As an example, Kinross recently announced a suspension of their operations in Russia and so investors may factor this into the valuation going forward.

We have also included columns for “Gross margins” and “net debt to EBITDA” (debt after subtracting cash compared to EBITDA) to help readers identify names that may be exposed to uncertainty around Russia but have strong fundamentals to weather the storm. For example, we have had some questions on Magna International (MG) due to some of their manufacturing plants based in Russia. While certainly there are risks for the company here, it is worth noting that exposure is only 0.5%, while it carries the lowest net debt to EBITDA ratio (0.3x) in the group. Looking at the company through this lens tells us that MG may not be as exposed as we might think and even there are setbacks, the company has a relatively strong balance sheet to navigate uncertainty.

Readers may wonder why we did not screen for other European countries (more specifically Ukraine). Based on our data, only one company showed exposure to Ukraine and we have included it at the bottom of the list. Secondly, we believe it is still too early to gauge the direct effects on the rest of Europe at this stage. Only time will tell, of course, but we certainly hope the damage does not spread further than it already has and that a peaceful resolution is achieved sooner than later.

As always, this screener should simply be viewed as an idea generator and not an endorsement of any of the above stocks for investment. You can view our previous screener blog here.

Knowledge pays the best dividends.

Disclaimer: The analyst(s) responsible for this report do not have a financial or other interest in securities mentioned