Return to the Old World — A Eurozone ETF

Jim D. Woodward, CC BY 2.0

The iShares MSCI Eurozone ETF (BATS:EZU) is an exchange-traded fund (ETF) that can give a prospective investor access to large- and mid-capitalization equities from companies that come from the developed market countries that use the euro as their official currency.

At the same time, the fund excludes firms from European countries that do not use the euro, even though these companies account for half of Europe’s market capitalization. This decision has led to two consequences for this ETF. The first is that the portfolio is heavily weighted towards French (35.05%) and German (26.84%) companies.

The second consequence is that the choice to focus on countries that use the euro once made this stock appealing to currency-focused investors at a time when the dollar was weak. Whether it still has this allure in the era of a weakening European economy remains to be seen.

This ETF’s portfolio includes: Total SA (NYSE:TOT), SAP SE (NYSE:SAP), LVMH Moët Hennessy Louis Vuitton SE (OTCMKTS:LVMUY), ASML Holding NV (NASDAQ:ASML), Sanofi (NASDAQ:SNY), Allianz SE (OTCMKTS:AZSEY), Unilever NV (NYSE:UN), Siemens AG (OTCMKTS:SIEGY) and Airbus SE (OTCMKTS:EADSY).

The fund currently has $5.29 billion in assets under management and an average spread of 0.03%. It also has an expense ratio of 0.47%, meaning that it is slightly more expensive to hold than many other ETFs.

This fund’s performance has been weak in the short run. As of Oct. 7, EZU is down 0.55% for the past month and 4.76% for the past three months. However, it is currently up 11.81% year to date.

Chart Courtesy of StockCharts.com

In short, while EZU does provide an investor with a chance to profit from the world of eurozone companies, the sector may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

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.