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Note: the following is an excerpt from our weekly newsletter ETF Spotlight, which can be downloaded here.

Part of our new coverage line-up is the ten iShares MSCI ACWI ex-US sector funds that provide pure sector exposure outside the U.S. (other Int'l sector funds include both U.S. and non-U.S. firms). So we were interested to see how they compared with their U.S. counterparts to see if we might uncover any pair trade opportunities.

We examined the price-to-cash flow multiples for the Sector SPDR funds and their International, ex-US counterparts (the Technology SPDR is shown against both the Int'l Tech and Int'l Telecom sector funds, since the Tech SPDR combines those two sectors).

All but one International Sector fund are trading at a P/CF discount compared with their U.S. counterparts, in some cases significantly. The exception was the iShares MSCI ACWI ex-US Health Care fund (NYSEARCA:AXHE) , which is the subject of this week's Fund Focus and a possible pairs trade (details in the full newsletter).

FIGURE: U.S. vs. World ex-U.S. Sector Funds

Price-to-cash flow multiples (2010E)


TABLE: Ticker, fund name & ALTAR Score™ of ETFs in above chart*

Sector U.S. Ticker ALTAR Score™ ex-US Ticker ALTAR Score™
Cons. Discr. XLY 4.7% AXDI 7.2%
Cons. Staples XLP 6.7% AXSL 6.0%
Energy XLE 11.0% AXEN 13.5%
Financials XLF 9.1% AXFN 10.4%
Health Care XLV 10.5% AXHE 7.5%
Industrials XLI 6.9% AXID 6.8%
Materials XLB 7.0% AXMT 8.4%
Technology XLK 6.4% AXIT 5.4%
Telecom Svc. XLK 6.4% AXTE 9.1%
Utilities XLU 8.7% AXUT 8.3%

*Note: ALTAR Score is our rating of an ETF's overall investment merit.


Disclosure: No positions

Source: U.S. vs. Ex-U.S. Sectors: Price-to-Cash Flow Multiples