5 Global Mendoza Line ETFs (DWX, EEB, FNI)
We've previously examined what we deemed Mendoza line ETFs, or those funds that are trading below their 200-day moving averages. The baseball euphemism works because it's used to describe a batter whose average resides below .200, a condition that occasionally afflicts even the game's best players.
Hey, until a couple of weeks ago Albert Pujols was below the Mendoza line. Thing is it's easier for a baseball player to pull himself out of this ominous territory than it is for a stock or ETF to get back above its 200-day line. Many technicians believe a security below its 200-day moving average denotes a bear market and many fund managers shy away from stocks, ETFs, etc. that rest below this critical moving average.
Unfortunately, there are no shortage of ETF Mendoza line candidates these days. Funds tracking global markets are especially well-represented on our latest sub-Mendoza line list. The screen used here was for traditional, long ETFs tracking global markets that are at least 10% below their simple 200-day moving averages.
Global X FTSE Argentina 20 ETF (NYSE: ARGT) No surprise here. Against perhaps the most hostile political backdrop in South America for Western companies, Argentina's current regime is literally cooking the goose that is ARGT, the lone ETF devoted exclusively to this frontier market.
Hey, you know you've got problems when some analysts say Peru (just one example) is more business friendly than your country. Unfortunately, Argentina's nationalistic tendencies have doomed ARGT. At more than 24% below its 200-day line, ARGT needs a hot streak and needs it fast.
Guggenheim BRIC ETF (NYSE: EEB) There are a lot of BRIC and BRICS ETFs on the market today and EEB obviously falls into the former category, leaving South Africa out of its country mix. No South Africa and a low allocation to India aren't bad things regarding EEB. If anything, those are points in the fund's favor.
EEB's problem is two-fold: A 25.3% allocation to energy stocks and a 54.6% weight to Brazil. Those are two of the biggest reasons why EEB is almost 13% below its Mendoza line.
SPDR S&P International Dividend ETF (NYSE: DWX) Even international dividend funds are offering little shelter from the global storm these days. In theory DWX, should be holding up better than it is as 39% of its weight goes to the ultimate in defensive sectors, telecommunications and utilities.
DWX offers exposure to 26 countries, but one could parse through that lineup and find problems with at least two-thirds of the group. The lineup includes seven Euro Zone members, the U.K. and Australia, meaning an alluring yield of 7% might be destined to grow in the near-term.
First Trust ISE Chindia Index Fund (NYSE: FNI) FNI is home to 50 stocks and the fund aims to evenly split the group between China and India at 25 for each country, but at the moment there are more Chinese stocks in the fund and the world's second-largest economy commands a larger percentage of FNI's total weight.
That's the good news because it can be argued Chinese stocks are currently sporting some compelling valuations. The bad news is almost every ETF with significant India exposure is being tarred and feathered in this environment, meaning India is and will continue to be a serious drag on FNI's performance. FNI is 11% below its 200-day moving average.
WisdomTree Global Natural Resources ETF (NYSE: GNAT) Despite the fact that over half of its weight is tied up in developed markets such as the U.K., the U.S., Canada and Australia, GNAT has not been able to hide from the fact that it's an energy and materials play. In the proper market environment, investors would want to own some of this ETF's top holdings such as Royal Dutch Shell (NYSE: RDS-A) and Total (NYSE: TOT).
That time isn't now and making matters worse for GNAT is on top of the fact that it's 11% below its 200-day line, the fund also recently entered death cross territory where the 200-day line moves below the 50-day moving average.
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