The Bargain Bin Is Getting Crammed

 | May 10, 2012 | 1:00 PM EDT  | Comments
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Stock quotes in this article:

RSX

,

FCG

Wednesday marked the sixth consecutive decline for the Dow, making this the longest losing streak since last summer. The global economy is still in pendulum mode. After a major rally that defied the lingering economic hurdles, the U.S. market has pulled back sharply over the last week despite data -- on both the domestic and international front -- that have actually been somewhat encouraging.

Just about every risky asset class has been hit hard over the past week or so. Stock markets around the globe have been hammered as concerns about the eurozone have intensified. But some have fared far worse than others during the free fall and, after a streak of red, some of the best buying opportunities will be found among the laggards. Examining the biggest losers from the month of May so far, a couple of ETFs stand out as attractive bargain purchases now:

Market Vectors Russia ETF (RSX): This ETF has lost about 11% of its value already in May, having declined every trading day so far. Russian stocks have been sliding recently for a variety of reasons. There are some significant concerns about the mounting discontent with President Vladimir Putin, who was recently sworn in amid intense protests. Moreover, weakness in oil prices has weighed on stocks recently. Russia's economy still depends largely on oil- and gas-related revenue, and declines in prices can have disastrous trickle-down effects.

Russia is a risky proposition. Its energy dependence, widespread corruption and challenging demographics make it a very different play than other economies in BRIC -- that is, Brazil, Russia, India and China. But at current prices RSX is a downright bargain, regardless of the risk. Russia ETFs are trading at a price-to-earnings ratio of about 8x right now, a ludicrously low figure that is just a fraction of both developed and emerging markets around the globe.

First Trust ISE Revere Natural Gas Index Fund (FCG): This fund rebounded slightly on Wednesday, but has been generally hammered throughout the last few sessions. Prior to its jump Wednesday, this ETF had lost about 6% on the month, outpacing the broad energy sector by a significant margin.

FCG's recent slid is a bit bizarre in that it has occurred amid rising natural gas prices. The United States Natural Gas Fund (UNG) is up almost 7% this month alone, making it one of the few winners in an otherwise abysmal month of May. As I've written before, FCG doesn't necessarily need strong natural gas prices to succeed as an investment. It should perform well in coming years as use of the fuel increases. But higher prices sure don't hurt, and the recent run-up in natural gas, coupled with the steep decline in FCG, makes this ETF a buy as well.

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