3 Country ETFs That Are Beating QQQ

Italy, Ireland and Peru remind investors that the Nasdaq 100 isn't the only place to find growth.

What do Irish stew, lasagna, and chaufa have to do with successful ETF investing for advisors? For starters, those Irish, Italian and Peruvian dishes make nice client dinners. 

For investors, there's more.

The ETFs that track their stock markets are ahead of the Invesco QQQ Trust ETF (QQQ) since the start of the 2022 bear market, and they are ahead of QQQ’s 7.5% gain year-to-date through last Friday. And in the case of two of the three, they have performed with lower volatility than QQQ, as measured by standard deviation. So, let’s flip to the next page of this ETF menu and get some details. 

Here's a surprise: QQQ has only had a total return including dividends of 12% from the start of 2022 through the end of last week. That’s a period of just over 27 months. 

If that seems impossible, given the exploits of FAANG stocks and the feeling of unbridled excitement about the U.S. stock market, especially big technology stocks, think again. Memories of the 33% drop in QQQ during 2022 faded quickly, and the so-called “recency effect” is very much in place today. For more than 23 of those 27 months, QQQ was under water, dating back to the market top that started the year in 2022.

Italy, Ireland ETFs That Beat QQQ 

So, it follows that it might be interesting to identify some ETFs that endured that period with more success, without taking on gigantic levels of risk. QQQ’s annualized standard deviation over the past three years is around 22%, a bit below its long-term average, as its mega cap leaders came to seen as a “flight to safety,” perhaps for the first time in Nasdaq Composite history. 

Now, let’s go global, and there we find that a trio of single-country ETFs have produced two to four times the return of QQQ since the start of 2022, with standard deviations in the same low to mid 20% range over the past three years. Here they are. 

The iShares MSCI Ireland ETF (EIRL) is up 24% since the first day of January 2022. This is a $120 million ETF that has been around since 2010. EIRL’s top 10 holdings make up 80% of the fund, which is not unusual for a single country ETF targeting a small nation. It’s largest holding—26%—is the parent company for FanDuel, the popular U.S. gaming business. 

Italy's stock market is represented by the $425 million iShares MSCI Italy ETF (EWI), which started way back in the last century, 1996. Since 2022, it too has handily outperformed QQQ, with a 23% gain. This 25 stock ETF yields 3.1%, has a trailing price-earnings ratio of 10.1x and has a weighted average market capitalization of $40 billion. So, its portfolio is packed with sizeable companies. 

Peruvian ETF Crushing QQQ 

And if you take the performance of EIRL and EWI and add them together, it still will not amount to the 49% return since the start of 2022 achieved by the $112 million iShares MSCI Peru & Global Exposure ETF (EPU). This 15-year-old ETF is not quite a pure play on the South American nation, as its portfolio allows it to hold non-Peruvian equities that have a large business presence in that country. That naturally includes some prominent copper mining stocks based in the U.S. and elsewhere. EPU yields 3.6% and sells at 15.4x trailing earnings.

As advisors determine whether the U.S. stock market is just starting a long-term re-emergence from the wreckage of 2022, or if this is beginning of the end of a nearly uninterrupted bull market cycle from 2009, it helps to realize that even in the best of times for U.S. markets and its economy, there’s a whole wide world of opportunity out there, for those advisors with the willingness to expand their scope.