The New Jersey-based financial adviser debuts with ‘McCall’s Call’ on IndexUniverse.com, a weekly column that will feature actionable investment ideas using ETFs that are based on current trends in financial markets and the economy.
I did some boots-on-the-ground investment research in Scandinavia after wrapping up at the Inside ETFs Conference in
The Nordic region, as it’s also called, is often overlooked by investors, who view it as a low-growth area. It’s true you can’t compare Scandinavia to
Investors can consider four ETFs, the broadest of which is the Global X FTSE Nordic ETF (NYSEArca: GXF), which captures all four countries. Sweden makes up more than 40 percent of GXF, and those who want to take the full plunge can buy the iShares MSCI Sweden ETF (NYSEArca: EWD). I like EWD because it’s more liquid than GXF, but the diversification of GXF makes it the better long-term investment.
In terms of price/earnings ratio, GXF stood at 16 at the end of April compared with 24.74 for EWD, the pure Swedish play. By comparison, the MSCI EAFE Index Fund (NYSEArca: EFA), iShares’ ETF of companies in developed countries excluding the
Another way to play
For investors wanting a niche ETF, the Claymore/Beacon Global Timber ETF (NYSEArca: CUT) gives investors 18 percent exposure to
Running The Numbers
Swedish companies make up a big part of GXF at 43 percent, followed by
EWD is at an 18-month high, powered by its exposure to the financial services (26 percent), telecom (22 percent) and industrial materials (21 percent). Two well-known companies in the top 10 holdings are LM Ericsson Telephone (NasdaqGS: ERIC) and automaker Volvo. The government recently forecast economic growth to pick up to 2.5 percent in 2010 and 3.9 percent by 2011, levels not seen in years.
The ETF tracks the MSCI Sweden Index, which is too new to have the historical data to compare the region with other countries. But the MSCI Nordic Countries Index, which has been in existence for more than 10 years, has average annual returns of 4.8 percent over the past five years, making it one of the best-performing MSCI developed-markets regional indices.
So to bring this whole discussion full circle,
Matthew D. McCall is editor of The ETF Bulletin and president of Penn Financial Group LLC, a