MarketMuse update profiling Europe’s market rebounding is courtesy of ETF Trends’ Tom Lydon.
With Greece seemingly in the headlines every day, and rarely with good news, it is easy for investors to perceive European equities as damaged and vulnerable to more declines.
On the brighter side of the ledger, history is littered with examples that highlight the profitability of contrarian investing and buying when others are fearful. Enter the Cambria Global Value ETF (NYSEArca: GVAL).
GVAL debuted in March to 2014 and to say the ETF was the victim of inauspicious timing is to understate matters. While an ideal way to gain access to some attractively valued developed European markets, GVAL also features ample emerging markets exposure. Neither emerging nor non-U.S. developed markets were the places to be soon after GVAL debuted.
“GVAL has gotten off to a humble start. But if you’re a believer in value investing as a discipline, then GVAL deserves a serious look. In a market in which the U.S. has outpaced its foreign competitors for years, I consider GVAL to be an excellent, diversified rebound play on Europe and emerging markets,” according to Charles Sizemore.
GVAL’s current emerging markets exposure among its top 10 country weights does not lack for controversy. Brazilian stocks, embroiled in a graft controversy surrounding Petrobras (NYSE: PBR), made up 12% of GVAL’s weight at the end of the fourth quarter. Russia and Greece, rarely deliverers of good news, combined for another 14% of GVAL at the end of 2014, according to Cambria data.
“But herein lies the beauty of GVAL. Few investors would have thick enough skin to take a large position in any of these countries individually. But even investors with nerves of steel would have trouble building a viable portfolio of stocks from most of these markets due to the lack of available U.S.-traded ADRs to buy. Very few investors have access to the small and mid-cap foreign stocks that dominate GVAL’s portfolio,” notes Sizemore.
The actively managed GVAL targets the cheapest, most liquid picks in countries where political or economic crisis have depressed valuations. GVAL’s eligible country universe includes Greece, Russia, Hungary, Ireland, Spain, Czech Republic, Italy and Portugal. At the end of 2014, 56% of the ETF’s country weight was allocated to Eurozone nations.
Investors can also access a sliver of GVAL via the Cambria Global Asset Allocation ETF (NYSEArca: GAA). Known as the ETF without an annual fee, GAA debuted in December and holds other ETFs. At the time of launched, GAA held a 4% weight to GVAL.