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A Europe ETF With Limited Risk And Solid Rewards


Although the euro has tumbled and the European Central Bank has enacted a massive quantitative easing regime, one that could be expanded in the coming months, 2015 has been a volatile year for exchange traded funds tracking European stocks.

Investors looking for lower beta single-country exposure to Eurozone economies have some credible options, including the iShares MSCI Netherlands ETF (EWN) , the lone U.S.-listed exchange traded fund dedicated to Dutch stocks. EWN and Dutch stocks have some perks that should not be glossed over.

The Netherlands is not nearly as controversial as the PIIGS and the Dutch economy and markets are not as expansive as their German and French counterparts. Those facts should not obfuscate Netherlands AEX stock index’s (AEX) leadership among European bourses and EWN’s 3.5% year-to-date gain.

EWN is home to 49 stocks, including some names familiar U.S. investors, such as Unilever (NYSE:UNV) and ING Groep (ING). Why the ETF should matter for investors seeking single-country Europe exposure is simple: Favorable risk/reward. [Explosive Growth for Single-Country ETFs]

However, EWN is not currency hedged, which could expose investors to some currency risk if the euro continues faltering against the dollar.

“This shouldn’t put off the long term investor, but its good practice to be aware of the currency risks, at least in the near term. The fund has 6.8 million shares outstanding, is marginable and has a reasonably good 20 day average volume of over 77,000 shares per trading session. The fund is passively managed and management fees are slight higher than the industry average 0.44%, totaling 0.48%,” according to a Seeking Alpha article on EWN.

Eurozone markets will stand to benefit and see exports rise as the euro currency continues to depreciate, making it cheaper for foreign markets to buy the European goods. Among the largest excess exporters, Netherlands and Germany rank among the top Eurozone countries. EWN allocates over 31.4% of its weight to consumer staples stocks, a sector that is highly correlated to the favorable export trend.

The comparison of EWN to the Switzerland and Belgium ETFs is relevant because like those ETFs, EWN features a large weight to the consumer staples sector, which has been a solid performer as of late. EWN has outperformed the comparable Switzerland ETF this year but has lagged the rival Belgium fund. [Super Staples ETFs]

iShares MSCI Netherlands ETF


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.