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EWL: Relatively Cheap But Not Attractive

Vasily Zyryanov profile picture
Vasily Zyryanov


  • There are 48 holdings in the EWL portfolio, 40 of which are classified as equities. The top ten names have a weight of over 68%.
  • EWL investors should not expect solid FX tailwinds that can bolster price returns, as the SNB clearly does not want the stronger CHF to cause troubles for the economy.
  • The ETF is overweight in healthcare, consumer staples, and financials. These three sectors account for 72.5% (33.7%, 20.9%, and 17.9%, respectively).
  • EWL's 5-year total return is subpar if compared to SPY.

The recent market jitters in the U.S. that were triggered by rising bond yields and related inflation fears once again proved that it is quite a smart idea to keep an eye on cheaper equities overseas that are, in theory, should be less sensitive to these factors.

Today, I would like to take a deeper look at the iShares MSCI Switzerland Capped ETF (NYSEARCA:EWL), a fund that is trading at just ~20x Price/Earnings, with a standardized yield of 1.6%.

In short, EWL is a solid long-term investment worth considering since it is overweight in defensive sectors (namely healthcare and consumer staples), and the Swiss franc is a safe-haven asset, thus the risk that the dollar-denominated ETF will suffer from the FX headwinds is minuscule, especially if compared to less developed economies that I have discussed last month.

However, the ETF's cumulative returns are anything but bright. For example, while the SPY investors enjoy a ~114% 5-year total return, EWL delivered TR slightly north of 68%. I also see no reason for EWL's outperformance in 2021.

Source: Seeking Alpha

The Swiss economy is not on a shaky footing, but risks do exist

The data that the State Secretariat for Economic Affairs published on February 26 illustrate that the Swiss economy is clearly not on a shaky footing. Despite the ripple effects of lockdowns, real GDP expanded by 0.3% in 4Q20. Economists surveyed by Bloomberg expected a stagnation.

Certainly, that rate marks a deceleration if compared to a 6.7% expansion in 3Q20 and reflects the economic toll of the reimposed restrictions. The preliminary data show that the annual real GDP contraction of 2.9% had been the worst since 1975.

But there is a silver lining. While services were under strain, "other industries continued to recover." For example, in 4Q20, construction expanded by 0.4%, while manufacturing benefited from robust

This article was written by

Vasily Zyryanov profile picture
Vasily Zyryanov is an individual investor and writer.He uses various techniques to find both relatively underpriced equities with strong upside potential and relatively overappreciated companies that have inflated valuation for a reason.In his research, he pays much attention to the energy sector (oil & gas supermajors, mid-cap, and small-cap exploration & production companies, the oilfield services firms), while he also covers a plethora of other industries from mining and chemicals to luxury bellwethers.He firmly believes that apart from simple profit and sales analysis, a meticulous investor must assess Free Cash Flow and Return on Capital to gain deeper insights and avoid sophomoric conclusions.While he favors underappreciated and misunderstood equities, he also acknowledges that some growth stocks do deserve their premium valuation, and its an investor's primary goal to delve deeper and uncover if the market's current opinion is correct or not.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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