ETF Pick of the Week: Two Swiss Havens

Here's my ETF pick for this week: iShares MSCI Switzerland (EWL).

While only 137 miles by 216 miles in size, with a population of 7.2 million, Switzerland packs a punch and is a multinational powerhouse. Let’s take a quick look at the asset side of Switzerland’s balance sheet.

It has a strong currency backed by ample gold reserves, fiscal discipline, trade surplus and very little foreign debt. Outward looking, Switzerland has 40% of its gross domestic product attributed to exports. Switzerland represents the third-largest financial center in the world after New York and London. It is also home to world-beating pharmaceutical, engineering and food companies.

Switzerland enjoys a stable government, vibrant democracy and a reputation as an asset haven in times of stress. The Swiss have had a functioning democracy for 500 years and actually has a fairly weak central government, with a legislature that meets for only two weeks, four times a year.

Reasons for Selection:

1) In times of stress, investors flee to quality markets like Switzerland known for its fiscal discipline.

2) Currently, about 45% of EWL's holdings are concentrated in three great companies: Nestle (NSRGY.PK)(19%), Roche Holdings AG (RHHBY.PK) and (13%) Novartis (NVS) (13%) all of which are pretty good defensive plays. Other top holdings include: UBS (UBS) (5%), Credit Suisse (CS) and (5%) Zurich Financial.

3) I also like this ETFs sector breakdown, led by Health Care 32%, Financials 22%, Consumer Staples 19%,Industrials 11%, Materials 8%, Consumer Discretionary 6%, and Telecommunications 2%.

Catalyst: The Swiss franc is one of the most stable currencies in the world and performs well in times of financial turmoil.

Tip: If you are looking for just a currency safe haven, take a look at the CurrencyShares Swiss Franc ETF (FXF).

Comments

[Paulo:]

SWZ (closed-ended fund) is also worth a look.

2008 Sep 29 11:33 AM

[phdinsuntan...:]

Switzerland is a nice place, but is surrounded by euros: any attempt of currency outperform and is inmediatelly "invaded" by europeans looking for jobs, they suffer the Yen/US syndrome, but they have good macro and gold. The following portfolio is performing even better in times of financial turmoil, but you need to be looking...


SMN UltraShort Basic Materials ProShares22.92%
EEV UltraShort MSCI Emerging Markets ProShares20.96%
QID UltraShort QQQ ProShares10.34%
SIJ UltraShort Industrials ProShares9.86%
DGP PowerShares DB Gold Double Long ETN9.73%
SDS UltraShort S&P500 ProShares9.64%
IEF iShares Lehman 7-10 Year Treasury Bond Fund9.47%
TWM UltraShort Russell2000 ProShares7.08%

2008 Sep 29 05:45 PM

[kotelyan:]

All the argument sounds right, and Switzerland is indeed a great place, but looking at the chart, comparing both EWL and SWZ to the DJX - they go hand-in-hand, in fact over the last 3 months DJX lost less, as well as for the last 5 days, and even yesterday?

2008 Sep 30 08:44 AM