by Jeff Reeves | December 27, 2012 12:25 pm
Think the eurozone disaster is a mess that no investor should go near? Well, think again. One of the top performing markets of 2012 has been Germany — with the iShares MSCI Germany Index Fund ETF (NYSE:EWG) up almost 30% year-to-date!
Not far behind: the iShares MSCI France Index ETF (NYSE:EWQ), up about 20% in 2012. And according to stock picker Charles Sizemore, this is only the beginning of gains in this France ETF.
Charles has been a big proponent of European stocks for some time, and has done well in a host of stocks there including Spanish financial stock Banco Santander (NYSE:SAN) and German manufacturer Siemens (NYSE:SI). Now, he’s nibbling at France.
Here’s why, in his own words, the France ETF is looking chic right now:
France is a country that often seems to prosper in spite of itself, but it is also home to some of the world’s finest companies — including oil major Total (NYSE:TOT), fashion and luxury goods powerhouse LVMH (PINK:LVMUY) and pharma giant Sanofi (NYSE:SNY), to name a few. Think about it. Only the crème de la crème could survive and thrive in a place as hostile to business as France.
France is cheap right now, for reasons you might expect. Investors have placed a “Europe discount” on the entire EU as fears linger about its continued viability. The French ETF trades for just 12 times earnings and yields 3.0% in dividends.
But as the fears of a eurozone breakup recede with each passing day, I expect investors to warm to French stocks over the course of 2013.
I also like the fact that EWQ is weighted heavily in industrials and consumer cyclicals (17% and 15% of the portfolio, respectively). This fits a broader theme I’ve been following of allocating to more aggressive sectors (see “Warren Buffett is Rotating into Riskier Sectors”).
Action to take: Buy shares of EWQ at market and plan to hold for 6-12 months. Use a 15% trailing loss.
Read more of Charles’ commentary on Sizemore Insights, part of the StockTwits network.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.
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