Why Volvo Beats EWD for Sweden Exposure

Roger Nusbaum submits: I noticed that several stocks I own for clients have lifted their dividends substantially. The impact on the portfolio will just be a couple of basis points or so, but it can add up over time.

I am reminded of the fact that people who bought Philip Morris (now Altria (MO) and a client holding) in the mid 1980s are getting 100%/year of their original cost. That to me is a very compelling argument to go heavy, but not exclusively, with dividend payers.

One item from my conference from the other day. During the panel I sat on (the only one I attended -- shhh don't tell anyone!) I was asked a question about country selection, and my answer included a mention of Sweden. One of my co-panelists, who runs a lot more money than me, but who I believe does not own any individual stocks (sorry if that it not correct) asked why I own Volvo instead of iShares Sweden (EWD) which he owns.

I have written favorably about EWD once or twice for TheStreet.com, and while it has generally done well, I view Volvo as a better way to capture the country. I pointed out that EWD is heaviest in Ericsson (turns out its 15%), and that telecom equipment stocks like that one, and Nokia too, tend to rotate in and out of favor very quickly. Telecom is a sector (I think of Ericsson as a telecom stock) where I want less octane and more yield for now. Also, Volvo is a way to add a lot of yield -- more so when I first bought it four years ago.

I am guessing, based on the look on my counterpart's face, that they don't think about ETFs in that manner (to be clear this is supposition on my part). If you integrate any type of fund product into your portfolio, I think it is crucial to make these sorts of assessments about the funds. It may be that adding volatility in telecom is the better trade, but that is not the point. Even with "passive" portfolios there will be some places where it will make sense to you to add volatility and some places where it will not.

I think viewing it in these terms will allow for better management of the overall result -- maybe not better returns, but maybe better risk-adjusted returns.

Volvo vs. EWD 2-year Chart