This Obscure Nasdaq Listing From A Faraway Land Has Outperformed The S&P 500 Over The Last Two Years. Is It Worth The Risk?
- Class action attempts since late 2023 and a Russian court seizing $21 million of billionaire CEO Timur Turlov's assets kept Freedom Holding bearish so far.
- Momentum indicators have massively improved, and solid earnings could move the stock closer to the MSCI emerging market index this summer.
When one thinks of emerging market stocks, few consider that faraway Central Asian nation, Kazakhstan, the place billionaire Timur Turlov calls home. But this year, a Kazakh e-commerce platform called Kaspi.Kz (KSPI) made its debut on the Nasdaq at $95.97 a share on January 19. It reached a peak of $135.14 and is now around $118 per share with a 6.16% dividend yield; unheard of for most new tech stocks.
Kaspi is new to U.S. investors. But it followed compatriot Freedom Holding Corp (NASDAQ:FRHC) to Wall Street this year. Freedom is primarily a financial services firm with around 3,600 employees, most in Kazakhstan. The holding company added 5G telecom to its portfolio in December 2023 after raising some $200 million back home to finance the company called Freedom Telecom.
Over the last two years, FRHC is up 52.65% versus 24.4% for the S&P 500 and besting the 8.24% gains for the iShares MSCI Emerging Markets Ex-China ETF (NASDAQ:EMXC). Since going public in October 2019, the stock has gained more than 423%. Only Bitcoin (CRYPTO: BTC) looks better.
The telecom venture didn’t do much for the stock, though. So when looked at in the near term, Kaspi has returned double digits, the EMXC ETF is up, the S&P 500 is up, and Freedom is down double digits.
Who Are These Guys Anyway?
Freedom Holding is the brainchild of Turlov. He owns the majority of the shares, so investors will likely be at the whims of his trades. Daily volume on this stock is well under 100k. You're investing in a Forbes billionaire and hope he makes the right business calls (which, arguably, is what made him a billionaire in the first place).
Bloomberg wrote about the company in August 2021, calling Freedom Financial (the main entity within the holding company) a “little-known financial empire” lorded over by two exotic pets – Gisha and Silvia – a pair of cockatoos.
Last summer, just around the time Freedom Holding made public its plans to invest in 5G, the stock was undergoing serious volatility due to shortseller’s attack that sent the stock to $68.80 and then it zoomed over $100 a share within a few weeks.
However, a Russian court case dragged the stock down again. Two months ago, on March 18, a Russian court seized $21 million of Turlov’s assets. He called the move “absurd.” Despite these challenges, it seems the company is doing okay. The stock is up around 5% since that day.
Freedom Holdings’ 3Q 2024 report published in February showed consolidated revenues increasing to $419 million, up 96% from last year. Operating expenses totaled $307 million for the third quarter, up 89% from the same period last year.
The company is mostly reliant on the markets of Kazakhstan, Uzbekistan, and Kyrgyzstan, which together account for around 90% of its revenue. Third-quarter revenue rose 137% from 2013.
Turlov started the company when he was around 36 years old during the Great Recession. He turned it into a $4.1 billion company. Investors in Freedom Holding need to believe Central Asia is an untapped frontier market and that Turlov is worth trusting as an investor mastermind. Since the IPO, Turlov has acquired a handful of startups to add to the holding company.
Momentum seems to be coming back to FRHC. If that holds, Freedom could at least catch up to its emerging market peers. Benzinga does not have any research on the stock, but MarketGrader says FRHC "looks inexpensive" relative to its fundamentals and called the company's growth "remarkable and consistent."
Class action attempts and the Russian court case have kept Freedom Holding bearish so far. Those legal challenges have tested the company. But as these challenges recede, investors are finding a stronger, more resilient Freedom Holding emerging from the doldrums with momentum now pushing the stock closer to its 200-day moving average and gaining on the iShares MSCI Emerging Markets Index (NYSE:EEM) ETF.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.