I've having a bit of "ETF envy" lately. Back in 2010 I decided that I'd have most of my exposure to the Brazilian stock market through the Market Vectors Brazil Small-Cap ETF (BRF) instead of the much larger iShares Brazil ETF (EWZ).
It's not so much that I wanted a bunch of smaller companies, but EWZ is heavily weighted (about 31%) to various share classes of just two companies, PetroBras (PBR) and Vale (VALE). I already own VALE, so I kind of preferred the sector weightings in the Market Vectors BRF ETF, which you can see here:
I think I made a good choice. Since inception in May 2009,the BRF ETF has more than doubled, while the larger EWZ fund is up about 60%.
But lately, EWZ has been performing better (although BRF did perk up a bit in recent weeks).
And it's not necessarily because EWZ's large holdings, Vale and PetroBras, have performed exceptionally well as you can see here:
Adjusting exposure: Add in some financials?
I was looking at this heat map (courtesy of XTF.com) of the Brazilian equity market:
Click to enlarge
As it turns out, the financials have been doing quite well, and BRF is kind of light on those stocks. So I took a look at some of the Brazilian financial stocks. These include:
- Itau Unibanco (ITUB)·
- Banco Santander Brasil (BSBR)
- Cielo SA (OTCQX:CIOXY)
- Banco Bradesco (BBD)
- Banco Do Brasil (OTCPK:BDORY)
I don't have charts, but here's a table that compares performance in 2011 and 2012 year to date for these stocks, and the ETFs and other stocks mentioned above.
So I'm thinking of adding some Brazilian financial stocks, specifically Itau, which is the country's largest bank and Cielo, which is actually more of a debit/credit card transaction company. This would be a great way for me to supplement the BRF ETF, which I already own, but get some extra financial exposure as well.
Just because you own an ETF doesn't mean you can't adjust your exposure a bit by mixing in some additional stocks, too.
Additional disclosure: Might buy ITUB and/or CIOXY.PK in the next 72 hours.