Investing in Australia and New Zealand Revisited (EWA)

Includes: EWA, PCL
by: Roger Nusbaum

I think the market has a little case of amnesia this week, writes Roger Nusbaum. Fortunately my time horizon is longer than a week. Believe it or not the SPX is still up a few a points for the months. That may evaporate, but I think I am reading some exasperation coming through some of the sites I read. If the idea of being exasperated is correct then maybe the next few days will be up. Who knows?

I have noticed that Oz and New Zealand have been doing well lately.

asx chart

This is textbook low correlation stuff at work. Another low correlation holding that has looked sharp has been Plum Creek Timber (NYSE:PCL). This is easy portfolio construction work. Over the last 10 or 15 years there have been plenty of article highlighting the low correlation that timber has with equities.

I certainly did not invent the idea of owning Australia for diversification, but admittedly those articles are tougher to find. I do have to say that I am really surprised by how few managers use foreign stocks. The companies are good, the dividends are high and the correlation to US holdings are low (I am talking in general terms, there are plenty of lousy foreign stocks that have a high correlation). If we are in for below average returns in the SPX for a while to come, wouldn't it be logical to think about more foreign? Maybe it's just me.


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