Greetings!
Below please find the ETF Spotlight newsletter containing highlights of the research and data on www.etfresearchcenter.com as well as a recap of the past week's action in the ETF market. Feel free to share it with anyone who may be interested.
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In this week's issue
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 Sector skew from equal weighting
- Chart of the week: Relative P/BV multiples, iShares MSCI Germany (EWG) vs. iShares S&P Europe 350 (IEV)
- Fund Focus: iShares MSCI Germany (EWG)
- Revisions, asset flows & short interest
- 2012 sales per share estimates, annual change, and P/Sales multiples for major ETFs
- Market monitor - movers & categories
To download the full newsletter click here.
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| Chart of the week |
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Are German valuations getting stretched?
The first mistake many investors make when analyzing country ETFs is to equate the stock index with the national economy. We don't deny that Germany enjoys having the strongest major economy in Europe, but the firms which dominate both the iShares MSCI Germany fund (EWG) and the broader iShares S&P Europe 350 (IEV) are multinationals that derive the majority of sales outside their country of domicile.
Since 2006 EWG has outperformed IEV by some 30%-age points and as a result valuations appear stretched. Historically, German stocks have traded at a discount price-to-book value multiple (P/BV) versus their European counterparts, but that seems justified given their lower average levels of profitability over the business cycle. Now however that discount has disappeared: stocks in EWG are trading at the top of their historical range in terms of relative P/BV multiple.
Download the full newsletter here. Chart: Relative P/BV multiple, iShares Germany (EWG) vs. Europe 350 (IEV)
Source: AltaVista Research |
| Fund Focus |
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iShares MSCI Germany (EWG)
Although stocks in EWG trade on par with other European equities in terms of most valuation multiples, German companies also have lower average profitability, and have historically traded at a discount. We think investors can do better with a broader approach to Europe such as with the iShares S&P Europe 350 (IEV). In any case, consider shielding European exposure from Greek fallout with a short position in the iShares MSCI Europe Financial fund (EUFN).
To download the full newsletter, click here.
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| New coverage | |
We recently added coverage of the following ETFs, bringing the total to 677 funds. Check ETF Research Center for details on any of them.
| LGEM | EGShares Basic Materials GEMS | | GGEM | EGShares Consumer Goods GEMS | | VGEM | EGShares Consumer Services | | HGEM | EGShares Health Care GEMS | | IGEM | EGShares Industrials GEMS | | QGEM | EGShares Technology GEMS | | TGEM | EGShares Telecom GEMS | | UGEM | EGShares Utilities GEMS |
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