{"id":24567,"date":"2011-10-18T13:00:01","date_gmt":"2011-10-18T17:00:01","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/10\/18\/three-etfs-to-profit-from-a-recovery-in-europe\/"},"modified":"2011-10-18T13:00:01","modified_gmt":"2011-10-18T17:00:01","slug":"three-etfs-to-profit-from-a-recovery-in-europe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/10\/18\/three-etfs-to-profit-from-a-recovery-in-europe\/","title":{"rendered":"Three ETFs to Profit from a Recovery in Europe"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

Well, so much for a quick fix.\u00a0 German Finance Minister Wolfgang Schaeuble ruled out a \u201cdefinitive solution\u201d to the ongoing Eurozone sovereign debt crisis at the coming weekend summit, prompting a sharp selloff in global stock markets.\u00a0 And adding an additional wet blanket to the fire of hope, the head of France\u2019s central bank said that the European Central Bank\u2019s bond-buying program would not be expanded.\u00a0 The ECB\u2019s bond buying program had previously been one of the few coherent policy decisions coming out of Europe and a critical part of the effort to avoid crisis contagion spreading to Spain and Italy.\u00a0 So much for that.<\/p>\n

\"\"<\/a><\/p>\n

Nero: The man was 1,947 years ahead of his time.<\/p>\n<\/div>\n

Like Nero two millennia ago, it appears that Europe\u2019s modern-day Caesars are content to fiddle while Rome\u2014and every other European capital\u2014burns.\u00a0 \u00a0\u00a0And until these little Neros stop acting like pandering politicians and start acting like real leaders, the capital markets promise to be volatile.<\/p>\n

Still, despite the muddle coming out of European capitals, something resembling a consensus is starting to take form.\u00a0 Greece is insolvent and will default (see \u201cThree Greek Stocks to Consider After the Default<\/a><\/strong>\u201d).\u00a0 The focus has shifted from propping up Greece to managing the fallout on Europe\u2019s banks after the inevitable default happens.\u00a0 If done correctly and in such a way that inspires market confidence, the damage will be contained.\u00a0 If done poorly and without adequate resources\u2026well, say hello again to a post-Lehman 2008 meltdown.<\/p>\n

All of their recent actions (and inactions) notwithstanding, I do not believe that Europe\u2019s leaders are stupid enough to allow a disorderly meltdown.\u00a0 But until there is a definitive solution\u2014what British Prime Minister David Cameron has called a \u201cbig bazooka\u201d\u2014expect the markets to be volatile, both to the upside and downside.<\/p>\n

Hang in there, dear investor.\u00a0 Volatility is not something investors should automatically run from.\u00a0 If you play your cards right, you can do quite well during times of volatility.\u00a0 Investing legend Warrant Buffett made some of his most profitable investments in decades during the 2008 meltdown, and plenty of other value investors did quite well.\u00a0 During a bear market or panic, good stocks go on sale.\u00a0 And when they do, you have to trust your analysis, ignore your emotions and the panicked noise around you, and buy with both fists.<\/p>\n

European stocks are trading near their lowest valuations in decades, and there are fantastic long-term buys to be found today.\u00a0 Spanish stocks trade at just 7.5 times earnings, and German stocks for less than 10.\u00a0 By comparison, at 13 times earnings, U.S. stocks would seem downright expensive.<\/p>\n

Investors should use any sharp selloffs as an opportunity to buy the dips.\u00a0 For those wanting an easy \u201cone stop shop\u201d option for investing in Europe, the following ETFs deserve a good look:<\/p>\n

iShares S&P Europe Index Fund (NYSE: $<\/span>IEV<\/a>)<\/strong>\u2014 This ETF is not a pure<\/em> play on the Eurozone, per se.\u00a0 It has a 35.1 percent allocation to the United Kingdom and another 13.3 percent allocation to Switzerland, which use the pound sterling and the franc, respectively.\u00a0\u00a0\u00a0 Considering the high correlations these days between the markets of Eurozone and non-Eurozone states, I don\u2019t consider this a problem.<\/p>\n

The ETF has a rather high 18 percent allocation to financials, but is otherwise well diversified across sectors.\u00a0 Its largest holdings are Nestl\u00e9 (Pink sheets: $<\/span>NSRGY<\/a>)<\/strong>, Novartis (NYSE: $<\/span>NVS<\/a>)<\/strong>, HSBC (NYSE: $<\/span>HBC<\/a>)<\/strong>and Vodafone (Nasdaq: $<\/span>VOD<\/a>)<\/strong>.<\/p>\n

The ETS trades at a trailing P\/E ratio of just 9 and a dividend yield of 3.55 percent .<\/p>\n

PowerShares International Dividend Achievers (NYSE: $<\/span>PID<\/a>)<\/strong>\u2014This ETF is my preferred way to play a rebound in Europe.\u00a0 It\u2019s not a pure play on the Eurozone\u2014or even on the European continent, as it has exposure to Canada, East Asia, and even Israel\u2014but it is an ETF loaded with survivors.\u00a0 To be included in this ETF, a company has to have raised its dividend for a minimum of five consecutive years.\u00a0 That means that any company on this list survived the 2008 meltdown and actually managed to raise<\/em> its dividend under those conditions.<\/p>\n

Like any traded security, there is always the risk that the value of your investment can fall in the short term.\u00a0 But given the quality and durability of this ETF\u2019s holdings\u2014and given that it trades for just 12 times earnings and pays a dividend yield of nearly 4 percent\u2014your risk of long-term loss would seem almost nil.\u00a0 PID has a large allocation to the telecom sector, which happens to be my favorite industrial sector at current prices, and counts among its holdings Sizemore Investment Letter<\/em><\/a> favorites Telef\u00f3nica (NYSE: $<\/span>TEF<\/a>)<\/strong>, Unilever (NYSE: $<\/span>UL<\/a>)<\/strong>, and Diageo (NYSE: $<\/span>DEO<\/a>)<\/strong>.<\/p>\n

ProShares Ultra MSCI Europe (NYSE: $<\/span>UPV<\/a>)<\/strong>\u2014This ETF is not <\/em>for the faint of heart.\u00a0 It is a leveraged fund designed to offer 200% of the daily return of the MSCI Europe index.\u00a0 On days when it appears the world is not<\/em> ending, this fund flies.\u00a0 But on days when risk aversion creeps back into the picture, the bottom falls out.\u00a0 On the day of Mr. Schaeuble\u2019s comments, the ETF dropped 6 percent.<\/p>\n

Still, investors wanting to place an aggressive bet on a recovery in Europe might find that this ETF is exactly what they\u2019re looking for.\u00a0 Just make sure you stock up on antacids ahead of time.<\/p>\n

If you liked this article by Sizemore Insights<\/i>, you\u2019d probably enjoy The Sizemore Investment Letter<\/i>, our premium members-only newsletter. Click here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter Well, so much for a quick fix.\u00a0 German Finance Minister Wolfgang Schaeuble ruled out a \u201cdefinitive solution\u201d to the ongoing Eurozone sovereign debt crisis at the coming weekend summit, prompting a sharp selloff in global stock markets.\u00a0 And adding an additional wet blanket to the fire of hope, the head of … <\/p>\n

Continue reading “Three ETFs to Profit from a Recovery in Europe”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24567","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24567","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24567"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24567\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24567"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24567"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24567"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}