Dorsey: Stay Long US; Spain & Switzerland Best Of Europe

June 30, 2014 INSIGHT

Guggenheim S&P 500 Equal Weight (RSP | A-76)
Tom Dorsey advocates overweighting U.S. equities, which, according to his indicators, continues to be the best asset class since October 2011. Among the barrage of available U.S. equity-focused ETFs, RSP remains Dorsey's No. 1 pick. With the S&P 500 Index rallying 25% over the past year, RSP's outperformance comes as no surprise. By equal-weighting the constituents of the S&P 500, RSP takes on more market risk (1.05 beta) and carries a growth bias, with midcaps getting a boost in weighting. Investor interest in RSP is strong: It boasts more than $8 billion in AUM and trades more than $45 million a day. For bullish investors looking to add a bit more strength on the upside during a U.S. equity rally, RSP remains a solid choice.

iShares MSCI Switzerland Capped ETF (EWL | B-97)
Dorsey notes that Switzerland is one of his top country picks, and that while he wants to see momentum continue, he would use pullbacks as a buying opportunity. Well, things are lining up nicely: EWL recently bounced off its highs, tumbling a few percentage points after a consistent two-year tear that saw returns in excess of 65 percent. That sounds like momentum with a pullback, which is exactly what Dorsey is looking for. Much like the Swiss equity market, EWL is highly concentrated, with more than 70 percent of its assets allocated to its top-10 holdings, including a whopping 17 percent allocation to Nestle. This ETF is also highly liquid, with pennywide spreads and more than $10 million of shares trading hands most days. Overall, EWL presents an efficient, liquid and representative portfolio for investing in Swiss equities.

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