Do Not Ignore the PIIGS (EWP, EWI, GREK, EIRL)
The PIIGS (Portugal, Ireland, Italy, Greece and Spain) were the worst of the worst when it came to European counties during the financial crisis. In 2009 it appeared the European Union was about to break up and the Greece would default and go back to the Drachma.
Fast forward a few years and the same countries that were on the brink of collapse are the now leading the global stock market higher. Since 5/23/13 the SPDR S&P 500 ETF (NYSE: SPY) is unchanged with a series of valleys and peaks throughout. Meanwhile, the PIIGS are attracting buyers and putting in solid gains.
Unfortunately there is currently no ETF that tracks the country of Portugal.
iShares MSCI Ireland Capped ETF (NYSE: EIRL)
The ETF is up 29 percent in 2013 and has risen by 11 percent since 5/23/13. The country has been flying under the radar for the last few years after it started to get its fiscal house in order. Ireland was one of the first of the PIIGS to run into trouble and major fiscal changes have the stock market once again looking attractive.
EIRL is a basket of 25 Irish stocks that is heavily concentrated in the materials, industrials, and consumer staples. The biggest risk for EIRL is the top holding, CRH Plc (NYSE: CRH), which makes up 25 percent of the entire ETF. The ETF has been pulling back and support is located in the $32 area.
iShares MSCI Italy Capped ETF (NYSE: EWI)
The ETF is lagging a bit with a gain of 11 percent this year, but is up 12 percent since 5/23/13. The recent rally in the Italian stocks has the ETF at the best level in 23 months as the U.S. and most developed markets are falling off their respective highs. The ETF is made up of 24 stocks with over half of the allocation in the financials and energy.
The top holding, ENI Spa (NYSE: E), is a major energy company and accounts for 18 percent of the ETF. As long as EWI can hold above the recent breakout level of $14.50, the chart remains bullish.
Global X FTSE Greece 20 ETF (NYSE: GREK)
An extremely volatile ETF in 2013 is currently up seven percent on the year and has gained 14 since 5/23/13. The problems in Greece are far from over, yet the country is in a much better state then they were a few years ago. The recovery in Greece will likely take years if not a decade or more. However, there is opportunity in the country due to its low valuations and potential turnaround.
The ETF has 22 stocks in the portfolio with 40 percent in the consumer discretionary sector. Hellenic Telecom (OTC: HLTOY) is the top holding with an 11 percent allocation. Technically the ETF has significant resistance at the $22-$22.50 area.
iShares MSCI Spain Capped ETF (NYSE: EWP)
Of the PIIGS ETFs, EWP has performed the best in 2013 with a gain of 18 percent and as of late it has done even better, rallying 17 percent from 5/23/13. The ETF has a major allocation in the financials with 45 percent in the sector. The top holding is Banco Santander (NYSE: SAN), which makes up 20 percent. The ETF is trading near a 23-month high and news about its first 30-year bond offering in four years today was another positive for the country. Support on the ETF is at the $35 area.
The PIIGS will carry above-average risk. That being said, if the risk-on trade comes back to the global markets the ETFs will likely continue to outperform their peers.
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