France ETF Is Looking Like a Chic Investment

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[1]) up almost 30% year-to-date!

Not far behind: the iShares MSCI France Index ETF (NYSE:EWQ[2]), up about 20% in 2012. And according to stock picker Charles Sizemore[3], 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[4]) and German manufacturer Siemens (NYSE:SI[5]). 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[6]), fashion and luxury goods powerhouse LVMH (PINK:LVMUY[7]) and pharma giant Sanofi (NYSE:SNY[8]), 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[9]”).

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[10], part of the StockTwits network.

Jeff Reeves[11] is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.”[12] Write him at editor@investorplace.com[13] or follow him on Twitter via @JeffReevesIP[14]. As of this writing, he did not own a position in any of the stocks named here.

Endnotes:
  1. EWG: http://studio-5.financialcontent.com/investplace/quote?Symbol=EWG
  2. EWQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=EWQ
  3. according to stock picker Charles Sizemore: http://charlessizemore.com/ooh-la-la-the-bullish-case-for-french-stocks/?utm_source=Sizemore+Insights+-+Free+Weekly+Newsletter&utm_campaign=e0cc677d45-RSS_EMAIL_CAMPAIGN&utm_medium=email
  4. SAN: http://studio-5.financialcontent.com/investplace/quote?Symbol=SAN
  5. SI: http://studio-5.financialcontent.com/investplace/quote?Symbol=SI
  6. TOT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TOT
  7. LVMUY: http://studio-5.financialcontent.com/investplace/quote?Symbol=LVMUY
  8. SNY: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNY
  9. Warren Buffett is Rotating into Riskier Sectors: http://charlessizemore.com/warren-buffett-is-rotating-into-riskier-sectors-should-you/
  10. Read more of Charles’ commentary on Sizemore Insights: http://charlessizemore.com/
  11. Jeff Reeves: http://slant.investorplace.com/author/profile/jeff-reeves/
  12. “The Frugal Investor’s Guide to Finding Great Stocks.”: http://www.amazon.com/dp/B007KB9CSI/ref=rdr_kindle_ext_tmb
  13. editor@investorplace.com: mailto:editor@investorplace.com
  14. @JeffReevesIP: http://twitter.com/JeffReevesIP

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