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Not many people know that the Lithuanian stock market has been one of the world’s best performing stock markets. The NSEL 30 index went up 338 % in the 3 year period 2003-2005. The average of all stocks traded went up 609 %. This year the NSEL 30 index is down 20 % year to date as are many emerging markets.
One of the reasons why I chose Lithuania for my investment and research base in late 1999 was its stock market. It had nearly 50 listed stocks. Stocks like Apranga and Mazeikiu Nafta sold for a fraction of their book value and less than cash flow. It was a value investors dream. It was the cheapest stock market on the planet and I was the only buyer. In classic tradition of John Templeton, the great investor, I had found it first. Estonia on the other hand had only 7 listed stocks and one, Hansabank, was over half the entire capitalization of the market. Latvia had only a few more than Estonia, but the list was dominated by shipping related companies with little or no transparency to the accounting and heavy insider ownership. Investing over the 3 Baltic markets would entail dealing with multiple currencies, opening accounts in multiple countries, dealing with geopolitical risk and inflation, and serious language difficulties to getting regular information.
How would I choose my Lithuanian stocks? After teaching efficient market theory and random walks for more than 20 years, I would buy them all! But some stocks were highly illiquid with most shares owned by the government or insiders. I needed to have a good index to know how the market was doing and one that I could invest in. The LITIN indexes were worthless as they used average price and were price based and not adjusted for splits and dividends.
There were no mutual funds in Lithuania – not even government funds by the banks. An imposing set of laws existed along with ridiculously high capital requirements and bureaucratic rules. Plus the laws were continuously changing. But since I had long been a stock market theoretician and even worked on with the very first index fund in the world – the S&P 500, it was an ideal selfish reason to form one to invest my own money! Therefore we founded the first mutual fund in Lithuania – the NSEL 30 Index Fund – fund to invest in the NSEL 30 index which we also created.
In 2001? the stock exchange became privately owned. The new OMX stock exchange has developed the OMXV which indeed is vastly superior to the old LITIN, but still comes up short. It does not adjust for float and some very large Lithuanian market cap stocks barely trade with less than 5% outstanding and are not a viable investment. Also it was constructed historically and varies considerably with what investor actually earned. For true results possible to the average investor follow the NSEL 30 index.
Emerging markets tend to go up and down like yo-yo’s. They have huge standard deviations and high returns - and losses. They tend to overreact in both directions and. If you have a stable democratic society with rules of law and property rights then you reduce greatly the risk. (Lithuanians have too many laws and far too much bureaucracy – now over layered with some even more laws of the European Union). Countries without laws and property rights can see stock markets loose huge amounts since everything is speculation and the average investor really don’t own anything. Russia, for example lost 85% in 1998. This will not happen in Lithuania. Currently Lithuania has 8% GDP growth and is likely to do 6-7% for the year ahead. This is far superior to the old tired economies in Europe and it translates to be superior investment for years to come. We have our own theory of stock prices called GRAPES. Our evaluation of Lithuanian stocks shows that as of date of June 30, the stock market is undervalued by 31%. A good time to buy.
If you would like further information, you can contact my company IPV (office@ipv.lt) or visit our website http://www.nsel30indexfund.com and ask for a free copy of our book – Guide to the Lithuanian Stock Market. It is the only book published on the market. This gives historical data and analysis/recommendations on all listed stocks on the Lithuanian Stock Exchange as of February 2006.
One of the reasons why I chose Lithuania for my investment and research base in late 1999 was its stock market. It had nearly 50 listed stocks. Stocks like Apranga and Mazeikiu Nafta sold for a fraction of their book value and less than cash flow. It was a value investors dream. It was the cheapest stock market on the planet and I was the only buyer. In classic tradition of John Templeton, the great investor, I had found it first. Estonia on the other hand had only 7 listed stocks and one, Hansabank, was over half the entire capitalization of the market. Latvia had only a few more than Estonia, but the list was dominated by shipping related companies with little or no transparency to the accounting and heavy insider ownership. Investing over the 3 Baltic markets would entail dealing with multiple currencies, opening accounts in multiple countries, dealing with geopolitical risk and inflation, and serious language difficulties to getting regular information.
How would I choose my Lithuanian stocks? After teaching efficient market theory and random walks for more than 20 years, I would buy them all! But some stocks were highly illiquid with most shares owned by the government or insiders. I needed to have a good index to know how the market was doing and one that I could invest in. The LITIN indexes were worthless as they used average price and were price based and not adjusted for splits and dividends.
There were no mutual funds in Lithuania – not even government funds by the banks. An imposing set of laws existed along with ridiculously high capital requirements and bureaucratic rules. Plus the laws were continuously changing. But since I had long been a stock market theoretician and even worked on with the very first index fund in the world – the S&P 500, it was an ideal selfish reason to form one to invest my own money! Therefore we founded the first mutual fund in Lithuania – the NSEL 30 Index Fund – fund to invest in the NSEL 30 index which we also created.
In 2001? the stock exchange became privately owned. The new OMX stock exchange has developed the OMXV which indeed is vastly superior to the old LITIN, but still comes up short. It does not adjust for float and some very large Lithuanian market cap stocks barely trade with less than 5% outstanding and are not a viable investment. Also it was constructed historically and varies considerably with what investor actually earned. For true results possible to the average investor follow the NSEL 30 index.
Emerging markets tend to go up and down like yo-yo’s. They have huge standard deviations and high returns - and losses. They tend to overreact in both directions and. If you have a stable democratic society with rules of law and property rights then you reduce greatly the risk. (Lithuanians have too many laws and far too much bureaucracy – now over layered with some even more laws of the European Union). Countries without laws and property rights can see stock markets loose huge amounts since everything is speculation and the average investor really don’t own anything. Russia, for example lost 85% in 1998. This will not happen in Lithuania. Currently Lithuania has 8% GDP growth and is likely to do 6-7% for the year ahead. This is far superior to the old tired economies in Europe and it translates to be superior investment for years to come. We have our own theory of stock prices called GRAPES. Our evaluation of Lithuanian stocks shows that as of date of June 30, the stock market is undervalued by 31%. A good time to buy.
If you would like further information, you can contact my company IPV (office@ipv.lt) or visit our website http://www.nsel30indexfund.com and ask for a free copy of our book – Guide to the Lithuanian Stock Market. It is the only book published on the market. This gives historical data and analysis/recommendations on all listed stocks on the Lithuanian Stock Exchange as of February 2006.