EWU: More Upside To Come For U.K. Stocks

Summary

• U.K. stocks continue to outperform the rest of the world yet remain extremely undervalued on a relative basis as earnings and dividend growth continue to outstrip that of their peers.
• I remain long the iShares MSCI United Kingdom ETF (EWU), which I have held since the March 2020 low.
• The low weighting of Tech stocks and high weighting of Materials and Energy largely explain the EWU's underperformance over the past decade, but bode well for future outperformance.
• While the outlook has deteriorated since then thanks to the strong gains already seen, the ETF still offers long-term return prospects of around 3% in real terms, which is significantly higher than most other developed markets.

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U.K. stocks continue to outperform the rest of the world yet remain extremely undervalued on a relative basis as earnings and dividend growth continue to outstrip that of their peers. I remain long the iShares MSCI United

Analyst’s Disclosure:I/we have a beneficial long position in the shares of EWU either through stock ownership, options, or other derivatives. 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.