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Ride Europe Rally With These Best-Performing ETFs

In tandem with the U.S. stock market, European stocks have been enjoying their longest winning streak since 2013. Notably, the Stoxx 600 European equity index wrapped up its seventh straight month of gain and is now less than 1% away from a record high.

Strong rebound in corporate earnings from last year’s pandemic-induced recession, reopening of the economies as well as an ultra-easing monetary stimulus into the economies around the world are the major catalysts. Companies on the Stoxx index have reported aggregate second-quarter net income growth of 249% from the year-ago quarter, when coronavirus shutdowns drove the Euro zone’s economy into its sharpest contraction on record. The percentage of European companies that beat analysts’ earnings estimates hit a five-year high in the second quarter, according to data provider, FactSet (read: 5 Must-Watch ETF Charts of Q2 Earnings).

Though European recovery still lags that of the United States, where the economy surpassed its pre-pandemic level in the second quarter, it has emerged from a double-dip recession with stronger-than-expected growth of 1.9% from the previous quarter and 13.2% from the year-ago quarter.

Many analysts expect the region to achieve the pre-pandemic milestone before the end of the year, given that the European Central Bank will keep its interest rates at record lows and continue purchasing 1.85 trillion euros in government and corporate bonds through at least March 2022. The move will drive down longer-term borrowing rates and help keep credit flowing to businesses and governments. Additionally, the rapid pace of vaccinations will likely fuel economic growth. The latest data showed that European Union had fully vaccinated 70% of its adult population.

According to the Summer 2021 interim Economic Forecast, the economy in the European Union and the Euro zone is set to expand by 4.8% this year and 4.5% in 2022.

Given this, investors could look at the European ETFs to ride out the bullish fundamentals. We have highlighted five of them that have enjoyed strong momentum and generated handsome returns in the year-to-date period.

iShares MSCI Netherlands ETF EWN – Up 29.8%

This ETF offers exposure to a broad range of companies in the Netherlands by tracking the MSCI Netherlands IMI 25/50 Index. It holds 58 stocks in its basket with large concentration on the top firm. Information technology dominates the portfolio with 33.5% of assets while industrials, consumer discretionary, financials, and consumer staples round off the next spots with double-digit exposure each. The product has amassed $329 million in its asset base while trading in average daily volume of 155,000 shares. It charges 51 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 Country ETFs Hover Around All-Time Highs).

iShares MSCI Austria ETF EWO – Up 29.6%

This ETF targets the Austrian stock market, offering exposure to 26 stocks with heavy concentration on the top three firms. Financials is the top sector accounting for 29.5% of the assets while industrials, materials, energy and utilities round off the next spots. The fund has accumulated $89.2 million in its asset base while trading in an average daily volume of 27,000 shares. It charges 51 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares MSCI Russia ETF ERUS – Up 25.3%

This product offers a broad exposure to Russia’s stock market by tracking the MSCI Russia 25 / 50 Index. It holds 25 stocks in its basket with heavy concentration on the top three firms. Energy takes the largest share at 44.5% while financials and materials round off the next two spots with double-digit exposure each. The product has AUM of $584.3 million and charges 59 bps in annual fees. It trades in average daily volume of 73,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

WisdomTree Europe SmallCap Dividend Fund DFE – Up 24%

This ETF provides exposure to dividend-paying small-cap companies in the European equity market. It follows the WisdomTree Europe SmallCap Dividend Index and holds 159 stocks in its basket. From a country look, United Kingdom takes the largest share at 27.6% while Norway and Sweden round off the next two with double-digit exposure each. With AUM of $358.1 million, DFE trades in small volume of 14,000 shares a day on average and charges 58 bps in annual fees. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: Here's Why Small-Cap ETFs Are Sizzling With Opportunities).

iShares MSCI Sweden ETF EWD – Up 23.9%

This ETF provides targeted exposure to the Swedish stock market by tracking the MSCI Sweden 25/50 Index. It holds a well-diversified basket of 41 stocks in its basket and charges investors 51 bps in fees per year. The fund has accumulated $658.8 million in its asset base and trades in average daily volume of 348,000 shares. It has a Zacks ETF Rank #3 with a Medium risk outlook.


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iShares MSCI Russia ETF (ERUS): ETF Research Reports
 
WisdomTree Europe SmallCap Dividend ETF (DFE): ETF Research Reports
 
iShares MSCI Austria ETF (EWO): ETF Research Reports
 
iShares MSCI Netherlands ETF (EWN): ETF Research Reports
 
iShares MSCI Sweden ETF (EWD): ETF Research Reports
 
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