iShares MSCI Germany ETF (EWG)
And finally we get to Germany and the iShares MSCI Germany ETF (EWG).
Germany had a lot to lose from a confrontation with Europe. Of all the major European economies, it was by far the most reliant on Russian energy. Germany depends on Russia for more than 40% of its natural gas and about a quarter of its total energy supplies.
If the West were to punish Russia too heavily, Putin would no doubt retaliate by hiking gas prices. That would have been potentially devastating to German industry.
German exporters also do quite well in Russia. This week’s Economist noted that Germany alone accounts for almost a third of the EU’s total exports to Russia, and that German exports to Russia are worth more than $48 billion per year.
German automakers also do particularly well in Russia. Russian purchases of German autos rose 22% last year.
So, is Germany a buy? German stocks are not wildly cheap at 15 times earnings, and I see less upside here than I do in RSX or TUR. Still, I do expect German stocks to enjoy a nice rally and, at a bare minimum, to outperform U.S. stocks in 2014. So if you’re looking for ETFs to buy, EWG is a good alternative to U.S. options.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he was long RSX and TUR. Check out his new premium service, Macro Trend Investor, which includes a free copy of his e-book, The New Megatrend Investor: The Ultimate Buy-and-Hold Strategy That Will Make You Rich.