Adding to Vostok Nafta at $24.65

I added to my Vostok Nafta holdings today, bringing my overall cost basis to $22.50 in these shares. This is a Swedish closed end fund, essentially, that invests in Russia — trades in Stockholm at VNIL and on the pink sheets at VNHIF.

I remain somewhat cautious about Russia, but some of the investment prospects are too good to resist. This is a speculative position with significant country risk, but I prefer this to the Russian ETF plays or the massive Russian oil and gas companies.

The company/fund is run by the Lundin family, at least indirectly, and has a fairly diversified collection of public and private equity investments in Russia. Their biggest holding is Black Earth Farming, which is buying up farmland in the “black earth” farm belts of Russia and the Ukraine. Several other Swedish and other regional investors are doing the same. The company segments its investment portfolio out by strategies/macro themes, which is very interesting — read the annual report if you’d like to see more, but they invest based on these strategies, for the most part:

“What works in the west…” — this is the reason for their Black Earth investment, bringing agribusiness to Russia. This also is the reason behind their recent offer for the remaining shares of Kontact East, a phone directory and online business directory company in Russia (not too different from a US yellow pages company), and some forestry investments. While agricultural commodities are all on the move, a big part of their Black Earth rationale is expanding agricultural production to help meet the need for biofuels in Europe.

“Commodities Super Cycle” has them investing in several commodity producing companies, including some copper and zinc miners, and they do hold shares of TNK-BP, which is a Russian oil firm.

Their other big investment strategies are Russian Infrastructure, which has them invested in several cement companies and in a firm that builds and sells concrete mixers, and in the restructuring of the Russian energy sector, which is primarily a bet on increased coal production and increased coal exports to China, which is already the biggest importer of Russian coal.

I’m not recommending this firm for anyone else, and I wouldn’t argue that it’s broadly interesting for everyone. But it fills a good spot in my portfolio — I’m more comfortable with active management in Russia than I am with ETF investments that ...

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