The Spanish economy got a significant vote of confidence yesterday
Bill Gates, the billionaire founder and chairman of Microsoft, bought a 6% stake in Spanish construction company Fomento De Construcciones y Contratas SA (FCC) for $148.4 million on Monday. This move makes Gates the second biggest shareholder, after Esther Koplowitz, a Spanish billionaire who owns a controlling stake.
As I articulated in my series on the Spanish economy, investors are anticipating recovery in southern European countries as the continent emerges from recession. Unemployment has peaked, and growth is becoming less negative, leading Spanish stocks to return over 36% in the last year.
FCC, like many Spanish stocks, has recovered much already
FCC, as a construction company, is a high-beta cyclical levered to the Spanish economy. The strong performance of cyclicals tends to precede recoveries, as investors both remove the discount they place on these companies during recessions and price in higher growth during recoveries. Laggards turn to leaders as economies start to look less bad.
Not many options for investors to get exposure to Spain
Unfortunately, FCC isn’t part of the index that the iShares MSCI Spain ETF (EWP) tracks. This fund is more concentrated than investors who are used to investing in US-based ETFs may be accustomed to, with a heavy allocation to financials and industrials. Investors can also get Spanish exposure from global funds such as the iShares MSCI EAFE Index (EFA), the SPDR EUROSTOXX 50 ETF (FEZ), the Vanguard MSCI Europe ETF (VGK), and the iShares MSCI EMU ETF (EZU).
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