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International Spotlight: Switzerland

May 04, 2015 8:41 PM ETSWZ1 Comment
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Fundamentals

Valuation Ratios in International Equity Markets

Country

CAPE

PE

PC

PB

PS

DY

World Average

20.7

18.8

10.8

2.1

1.2

2.3%

Switzerland

23.4

19.7

13.3

2.7

2.0

3.0%

On the basis of book value, Switzerland's market is expensive compared to the world average. However, its 22% premium shrinks to a 6% premium when corrected for sector exposure.

Economic Freedom

Switzerland is the fifth freest country in the world. Improvements in labor and trade freedom have led to its rise over the past few years. Switzerland enjoys strong employment, monetary stability, and low public debt.

2015 Index of Economic Freedom

Transparency

Switzerland is one of the least corrupt countries in the world. It is one of the least likely places to have to pay bribes. The country's government is expert at rooting out any signs of corruption.

Discounted Exposure

Swiss Helvetia Fund, Inc (SWZ) currently trades at about a 14% discount to its NAV. That discount is greater than its 10 year, 5 year, 1 year, and year to date average discount.

Conclusion

Switzerland's equity market is not cheap. Buying it at a discount to NAV via a closed-end fund/CEF helps take the cost down somewhat. Also, the transparent, free economy help justify the premium that the Swiss market commands.

Analyst's Disclosure: I am/we are long SWZ.

Chris DeMuth Jr is a portfolio manager at Rangeley Capital. Rangeley invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our investors, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.

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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