Lukewarm About GF At This Juncture

Summary

• GF, a CEF that focuses on 60 German stocks, the bulk of which are mid-caps, has been outperforming the MSCI EAFE by 2.5x this year.
• GF has outperformed this year, but its long-term price track record and weak distributions profile make it a questionable investment at current levels,.
• The fund is heavily tilted toward German industrials, while conditions for that sector are hardly resilient.
• GF's valuations look pricey versus Europe, while the German discount to US stocks has narrowed.
• Valuations are no longer cheap, relative strength has mean-reverted, and technicals suggest limited upside—GF is a HOLD.

Introduction

Investors who are looking to go down the CEF [Closed-end fund] route in order to gain exposure to equities from Europe’s largest economy-Germany, will likely be directed to DWS Asset Management’s the New Germany Fund (NYSE:GF). This year, GF

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.