Exchange Traded Funds (ETFs)

This Fund Focuses on Countries That Use the Euro

With $8.8 billion in total assets, the exchange-traded fund (ETF) iShares MSCI EMU Index ETF (EZU) is the third-largest fund in the European equity markets, behind only WisdomTree Europe Hedged Equity (HEDJ) and Vanguard FTSE Europe (VGK), both of which were covered earlier in our ongoing series about European ETFs.

EZU is 83% allocated to large-cap companies, with 14% in mid caps and 2% in small caps. All of these companies are from countries that use the euro, with EZU thereby designed to exclude stocks from non-euro countries such as the United Kingdom, Switzerland and Sweden.

Since these three countries combined account for approximately half of the entire European market’s capitalization, EZU’s focus is not on the broad market, but rather concentrated on a few countries, such as France (32% of EZU’s portfolio) and Germany (29%).

Some risks to keep in mind that could affect EZU are euro-currency fluctuations and uncertainty due to national elections in Germany and France that are scheduled for later this year.

EZU has experienced ups and downs over the course of 2016, as evident in the chart below. However, it has performed well since December 2016 and its share price has climbed to new heights. As of March 2017, EZU had been trading at its highest levels since fall of 2015 and is up 9.31% year to date, versus a year-to-date 4.89% increase in the S&P 500. EZU has an expense ratio of 0.50% and a distribution yield of 2.84%.

EZU has more than 250 holdings in its portfolio, without investing more than 3% of the fund’s total assets in any single position. From a sector point of view, EZU is well diversified, with 20% invested in financials, 14.92% in industrials, 13.86% in consumer discretionary and 10.67% in consumer staples.

EZU’s top five holdings are Total SA, 2.77%; Sanofi SA, 2.53%; Siemens AG, 2.50%; SAP SE, 2.35%; and Bayer AG, 2.33%.

If you are seeking exposure to developed market countries that use the euro, I encourage you to look at the iShares MSCI EMU Index ETF (EZU) as a possible addition to your portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.