ETF Showdown: EZU vs. FEZ

For those not living in a cave, Europe is dominating the headlines these days. Problematic PIGS or PIIGS depending on your choice have been roiling global equity markets for over a year now, but there may some slivers of hope. Italian bonds are starting to look attractive, to some money managers at least, according to a Bloomberg piece on Monday. Portugal's $1.62 billion bond auction went well today and hopefully, the same can be said of Spain tomorrow. It's still a tricky time to endorse rushing into a country-specific ETF tracking the likes of Spain or Italy, but that doesn't mean investors should shun Europe altogether, but if for those opting to go the way of an ETF that encompasses multiple European markets, homework is necessary. Take the example of the SPDR EURO STOXX 50 ETF FEZ and the iShares MSCI EMU Index Fund EZU. To be sure there are differences in these two ETFs. EZU tracks 274 stocks while FEZ tracks 50 (duh). Financials account for almost 27% of FEZ, but just 21% of EZU. France and Germany account for more than 68% of FEZ's country weight while representing almost 59% of EZU's. The allocations to Spain and Italy are basically the same and Total TOT, Europe's third-largest oil company, is the top holding in both funds. The next biggest oil play in both funds is Italy's Eni E. Oddly enough, neither FEZ nor EZU offer any exposure to Royal Dutch Shell RDS or BP BP, Europe's two largest oil companies. This is exactly why homework is needed. Investors may think these ETFs would include BP and/or Shell. Alas, they do not. As for the showdown, EZU would be the better bet for a very conservative investor as it is spreads its wagers over a broader swath of stocks. FEZ is a decent idea for the investor that is very bullish on Europe and looking to benefit from a more concentrated bet. This showdown is a draw, but don't bother owning both ETFs at the same time.