Switzerland ETF Getting Ready to Rebound

I consider Switzerland, Dubai and Singapore to be major centers of commerce, finance of all sorts, trade and intrigue in the 21st century. These safe havens draw assets in the mega billions of dollars from ethical and rogue nations and characters alike.

Stable, micro-managed Singapore as an investment destination has done reasonably well in an unpredictable third world region. Dubai is a work in progress. Switzerland has underperformed. Switzerland, especially iShares Switzerland (EWL), may be getting based to outperform as markets elsewhere gyrate, shaking many investor's tolerance for risk.

Looking at the portfolio of EWL, the top ten holdings of the approximately forty securities held comprise almost 70% of the assets. These top ten securities include Nestle, Roche Holdings, Novartis (NVS), UBS (UBS), ABB Ltd. (ABB), Credit Suisse Group (CS), Zurich Financial Services (ZFSVY.OB), CIE Financial Services, Syngenta AG (SYT) and Swiss Reinsurance (SWCEY). Portfolio turnover is a paltry 5%.Most of the portfolio is in financials and health care which are not where most financial pros are telling investors to sink their investment dollars.

I submit that the world-class companies listed in this ETF are going to rebound, and rebound strongly. Being located in Switzerland, the most politically nuetral of nations, the companies within EWL will have no trouble doing business with any country on the world. That cannot be said about companies headquartered elsewhere. The entire Swiss ETF reads like a gold-plated roster of quality regarding future business prospects.

Trading at $23.66 per share with an average volume of 543,000 shares over the past ten days, EWL has declined almost 10% in value during the past month. EWL has set off mildly bearish signals all over the place, is not loved by Morningstar and has underperormed most broad-based Europe indexes for quite some time. EWL is based on the MSCI Switzerland Index. The fund has a 52 week trading range of $27.76-$22.95 and an expense ratio of .51% with a 1.05% dividend. To most, boring and unloved. To me, a low risk opportunity to enter a stable and internationally respected roster of quality companies on the cheap.

As we continue to reach out for investment profits in what has been an unforgiving market practically worldwide, EWL may (finally) be a good choice to include in your portfolio. This ETF is not volatile, not risky, and won't make you rich. It does present the opportunity to reap modest rewards and, importantly, avoid insomnia.

Full Disclosure: The author holds EWL and EWS in his portfolio.

Comments

[closedendtr...:]

If you want to play Switzerland, consider buying SWZ rather than EWL. SWZ has out-performed EWL by 3% - 4% per year on an NAV basis over the trailing 1, 3, 5, and 10 years. While the current 12.8% discount to NAV on SWZ is not compellingly high, it more than makes up for the incremental fees you pay for active management in SWZ vs. index management in EWL. Disclosure: I am long SWZ.

2008 Feb 12 09:52 AM

[Robert West...:]

I've been in and out of EWL on a number of occasions (and currently live in Dubai and prior to that in Singapore). EWL is potentially a high quality "get rich slowly" ETF, however some thoughts :

1. Dubai & Singapore are key regional hubs, dominating their neighbours in developmental terms, supply of capital and "hustle factor" etc hence the "magnetism" and rapid growth.

2. EWL appears to be strongly correlated (but less diversified) to the many broader European ETF's (whether incl/excl UK, EMU countries etc) - iShares UK has a particularly good selection of these

3. Whilst EWL has concentrations in Pharma & Financials the majority of names are so international that the aggregate performance of EWL has little to do with Switzerland per se (nor the defensiveness of the Swiss Franc as most underlying cash flows of the larger companies are actually USD and EUR)

2008 Feb 12 10:21 AM

[Thomas Smic...:]

Good points above.

Points:
The international companies that make up the majority of the ETF are of interest to me as they are out of favor and represent good buying opportunities in total. Being based in Switzerland gives these companies an international political advantage, imo, for enhanced business opportunities. Currency speculation is not a reason to consider this ETF. The EU and US may not be as close a link to EWL in the future due to increasingly anti-growth and isolationist political schemes. Switzerland's long standing reputation for a safe haven dwarfs Singapore and Dubai. Longevity counts, as does geographical and political safety.

There are a few ways to play the Swiss company theme. EWL has the ingredients to be an anchor, steadying your investment vessel in turbulent seas. We all know that it is not a get rich quick investment, and probably not the place to be overweight in a bull market environment.

2008 Feb 12 10:44 AM

[granger:]

Good stuff thank you. I currently own SGF and EWL. I will check out SWZ again, have not looked at in a while. Thanks again.

2008 Feb 12 12:24 PM