4 ETFs With Low P/E Ratios (RSX, GMFS, XES)
Last month, we evaluated several ETFs that are chock full of high P/E stocks or funds that have high P/E/ themselves. At the time, we noted that since various fund sponsors employ different methodologies when coming up with an ETF's P/E ratio and that calculating a large fund's weighted P/E can be a cumbersome task, an ETF's P/E ratio isn't always as instructive as an individual stock's.
Well, sometimes it can be. The current market environment isn't conducive to owning stocks or ETFs with rich valuations and that much has been proven by the performance of the high P/E funds we recently profiled. All are down in the past month, with the SPDR S&P Semiconductor ETF (NYSE: XSD) leading the way with an 8.4% tumble.
Given that level of success with using the P/E ratio to find ETFs that might be vulnerable to declines, we're now flipping the script and looking for funds that appear cheap and could prove to worth a look for prescient investors.
SPDR S&P Small Cap Emerging Asia Pacific ETF (NYSE: GMFS) The SPDR S&P Small Cap Emerging Asia Pacific ETF has garnered only minimal attention since its January debut and in a market where emerging markets equities and small caps have been repudiated, it's easy to see why the fund now sports a compelling valuation.
GMFS has tumbled 10% in the past month and now trades for less than 10 times the forecasted fiscal year EPS of its constituents. That implies GMFS, which is home to 495 stocks, is far cheaper than the large-cap focused iShares MSCI Emerging Markets Index Fund (NYSE: EEM) and the Vanguard MSCI Emerging Markets ETF (NYSE: VWO). Taiwan, China and India combine for over 75% of GMFS' country weight.
SPDR S&P Oil & Gas Equipment & Services ETF (NYSE: XES) Highly correlated to the price of crude, it's no surprise that the SPDR S&P Oil & Gas Equipment & Services ETF and rival funds such as the Market Vectors Oil Services ETF (NYSE: OIH) and the iShares Dow Jones U.S. Oil Equipment & Services Index Fund (NYSE: IEZ) have been decked in the past month as West Texas Intermediate futures have fallen about 20%.
To its credit, XES has been the best performer of that trio since early May and one reason for that might be the ETF's more even distribution among its holdings. IEZ and OIH are heavily allocated to Schlumberger (NYSE: SLB), National Oilwell Varco (NYSE: NOV) and Halliburton (NYSE: HAL). Regarding XES, no stock receives a weight north of 3.22%. As for valuation, XES has a P/E of 10.47, barely more than half that of IEZ.
EGShares Low Volatility Emerging Markets Dividend ETF (NYSE: HILO) Unheralded HILO is deserving of a place at the top of any list pertaining to emerging markets dividends ETF. An index yield of 6.44% says as much.
Here's what's interesting to note about HILO right now: No, it has not been the best performer in the past month, losing 11%. However, that's better than what the iShares Brazil Index Fund (NYSE: EWZ) and the iShares FTSE China 25 Index Fund (NYSE: FXI) have offered and HILO's current P/E of just over 9 is cheaper than the FXI, EWZ and the iShares MSCI South Africa Index Fund (NYSE: EZA). Those three countries account for about 48% of HILO's weight.
Market Vectors Russia ETF (NYSE: RSX) In some ways, the Market Vectors Russia ETF embodies the problems of all the funds mentioned here. That is to say the largest and oldest Russia ETF on the market has been slammed not only because it's an emerging markets ETF, but also because it's a commodities ETF. Russia is the largest non-OPEC oil producer and oil is the biggest contributor to the government's coffers.
There's no getting around the fact that the returns offered by RSX and its rivals have been putrid in the past month. There's also no getting around the fact that that there are some signs bears are lightening up on RSX and that Russian equities are now cheap. That's cheap relative to the other BRICS and the emerging markets universe at large.
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