One of the cool things about the exchange-traded fund (ETF) boom, is that investors don’t have to be constrained by borders. And that’s a good thing. That’s because as we’ve become more of a global and interconnected economy, there are now plenty of investment opportunities outside a portfolio’s home market.
Some of which may be better buys or values.
And with ETFs, overweighting those various counties that have much better prospects or cheaper stocks is easy. You can add Malaysia equities as easy as buying shares of something like McDonald’s Corporation (NYSE:MCD).
But what exactly are the some of the best individual country opportunities for investors these days? Here’s five of the finest that can be played using single-country ETFs.
5 Best Countries For ETF Investment: United Kingdom
One of the biggest appeals for investing in the U.S. is that it is home to some of the world’s largest multinationals. The same can be said for the United Kingdom.
Giants like spirit-maker Diageo PLC (NYSE:DEO) or pharmaceutical firm GlaxoSmithKline PLC (ADR) (NYSE:GSK) call the U.K. it home.
However, unlike the U.S., the United Kingdom is a pretty cheap market. Currently, stocks in the iShares MSCI United Kingdom ETF (NYSEARCA:EWU) trade for a price-to-earnings ratio of only 12 and earned a whopping 7.7% dividend yield in the last 12 months.
And while there is some concern over the U.K.’s fragile economic recovery, the truth is many of its multinational giants receive the lion’s share of their revenues from outside the nation’s borders. That effect is boated even further by the nation’s failing pound sterling currency.
Which means EWU could be a big buy for investors.
The $3 billion EWU tracks 108 of the nation’s largest multinationals — making the ETF an easy way to overweight the U.K.’s strongest firms. Expenses are pretty cheap as well — EWU only costs 0.49%, or $49 per $10,000 invested.
Given the U.K.’s cheapness, large dividend yield and export nature, EWU could be a great long-term buy.
5 Best Countries For ETF Investment: India
When you think about the BRIC countries — Brazil, Russia, India and China — forget about the B, R and C. You should be focusing solely on the I. India is finally realizing its potential.
Since the election of Narendra Modi as prime minster, stocks within India have surged. Modi ran on a platform of removing corruption and bureaucratic red tape that have stifled growth and caused widespread inflation in the country.
Removing those barriers, along with promoting policies to build-out India’s infrastructure and manufacturing base, boosting its consumer class and cleaning up pollution have begun to work their magic.
Analysts now estimate that India’s GDP will grow between 8% and 8.5% this year. That could make the WisdomTree India Earnings ETF (NYSEARCA:EPI) a great play.
The smart beta ETF tracks an index of Indian equities that focuses on the quality and size of their earnings. By applying screens, WisdomTree hopes to kick out any of the problem children of the Indian market. That focus has worked well as EPI is up 30% in the last year — roughly when Modi was elected.
Currently, the $2.4 billion ETF holds 230 stocks — giving investors a wide swath of the India’s major stocks. Expenses for EPI cost 0.83%, or $83 per $10,000 invested.
5 Best Countries For ETF Investment: Israel
The current craziness in the Middle East has created some interesting opportunities. And that’s not just in some crazy frontier markets. Stocks in Israel can currently be had for P/E ratio of just 15.
That’s reeeeeeeally cheap considering just how much of a growth economy Israel is.
Despite having only around 8 million residents and a land mass the size of New Jersey, Israel has truly emerged as a premier high-technology investment destination. Without the benefit of massive oil reserves of its neighbors, Israel needed other ways to grow its economy. The “Great Tech Miracle” pushed the country into being a healthcare, technology and wireless superpower. Today, the NASDAQ is filled with Israeli-based tech and biotech firms.
To play Israel’s growth, the iShares MSCI Israel Capped ETF (NYSEARCA:EIS) is still the best ETF to buy.
EIS tracks 55 of Israel’s top companies — including generic drug/biotech firm Teva Pharmaceutical Industries Limited (ADR) (NYSE:TEVA), and defense technology stock NICE Systems (NASDAQ:NICE). About 40% of the ETFs holdings are in tech/healthcare related stocks, which is dominated by TEVA at 25% of the fund’s weight by itself.
EIS a high growth play for dirt cheap. It’s also pretty cheap on the expenses front as well — 0.62%, or $62 for every $10,000 invested.
5 Best Countries For ETF Investment: Portugal
As one of the PIIGS, (Portugal, Italy, Greece and Spain), Portugal seems an odd investment destination for investors. But it might actually be a huge winner throughout the year and next for a variety of reasons.
First, the struggling nation may finally have its fiscal and economic house in order. After struggling under the weight of a three-year bailout plan from the European Union and International Monetary Fund, Portugal finally returned to economic growth in the third quarter of 2014. This year, analysts peg that growth to accelerate.
Meanwhile, many of its banking issues seem contained and fiscal policy for Europe — courtesy of the ECB’s “whatever it takes” stance — will drive stocks in the battered nation.
For value hounds, the Global X FTSE Portugal 20 ETF (NYSEARCA:PGAL) is the only game in own when it comes to playing the nation. PGAL tracks 23 of the nation’s largest firms — most of which are unfamiliar to U.S. investors. The bulk are in the utilities and financial sector.
That means this very much a play on Portugal’s rebounding health. It’s risky, but it could be a huge win for investors.
5 Best Countries For ETF Investment: United States
While there are much cheaper nations than the U.S., there still can be something said for buying U.S. stocks. All in all, the economic recovery seems to be humming right along — with unemployment down, consumer confidence up and measures of inflation holding steady. And while a surprise rate hike could be in order, that shouldn’t wreck U.S. stocks appeal in the near or long term.
And recent drops in the major U.S. stock indexes has made the nation a bit cheaper than before. Even cheaper are U.S. value-styled stocks.
The Vanguard S&P 500 Value ETF (NYSEARCA:VOOV) can be had for a P/E of just 15 versus the S&P 500’s P/E of 19.
The $245 million ETF tracks the 364 companies of the S&P 500 that which have the cheapest book value-to-price, earnings-to-price and sales-to-price ratios. That kicks out much of the overpriced stocks in the U.S. and provides a larger margin of safety when that rate hike does come.
And as a Vanguard fund, the VOOV is basically free to own. Costs for ownership of the ETF are only 0.15%, or $15 for each $10,000 invested.
All in all, the VOOV makes betting on the potentially best horse that much cheaper.
As of this writing, Aaron Levitt was long EPI and EIS.
