Hougan: Three ETFs For Contrarians

August 24, 2015

One of the best parts of my job is that I get to speak to a lot of smart advisors and wealth managers who study the markets and are always looking for new opportunities. Since my personal portfolio is exquisitely boring, I live vicariously through these swashbuckling investors willing to trade where most investors fear to tread.

With the markets in turmoil, I’ve been speaking to more of them than usual, and the most swashbuckling of the lot are starting to chatter about looking for bargains. I usually ignore this unless multiple people mention the same ETF.

Here are three bottom-fishing ideas that have come up with multiple people in the past month.

Contrarian Pick No. 1: Global X MSCI Argentina ETF (ARGT)

This ETF hasn’t attracted much in the way of assets since it launched—just $15 million at last check. But as the only ETF offering exposure to Argentina, it’s getting an increasing amount of buzz.

Argentina has been a basket case for the past 20 years (you could argue “for the past century”), with political corruption and loan defaults occurring with frightening regularity. But it’s widely seen as a country with great potential, including huge, untapped natural resources and a solid manufacturing base.

The outlook for ARGT hinges in large part on the October (and November) elections.

If opposition candidate Mauricio Macri can win the presidency, the consensus believes he would reopen Argentina to foreign investment and pursue business-friendly policies. The first round of elections takes place October 25.

Most assume Macri will lose that round in a multiparty ballot to ruling party favorite Daniel Scoli. But if Macri can keep the contest within 10 percent, he’ll force a runoff election in November, which some predict he’ll win.

That would open the doors for ARGT. Interestingly, it’s clear some are already betting on this outcome: The fund is one of the few emerging market/frontier market ETFs with a positive return over the past three years, having posted 2.85 percent annual returns for that time.

That compares with a 12.42 percent annualized loss for the longest-running broad-based frontier market ETF, the Guggenheim Frontier Markets ETF (FRN | F-26).

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