How To Follow Bill Gates Into Spain (EWP, FEZ, TEF, SAN, BBVA)
News that Microsoft (NASDAQ: MSFT) founder, Bill Gates, is investing in a large Spanish construction company has investors eyeing the country for investment opportunities.
The world’s richest man bought a six percent stake in Fomento de Construcciones & Contratas (FCC), worth $155 million. It is not the norm for Gates to invest large portions of his money overseas.
The move by Gates is interesting because it is not only in one of the PIIGS countries, but it is also in a sector that has been beaten down during the financial crisis. FCC trades 80 percent below its high set in 2007, so there is plenty of upside is the recovery in the country continues.
While most investors will not buy into FCC, there are a few options for U.S. investors to consider if they are inclined to put some money into Spain.
iShares MSCI Spain ETF (NYSE: EWP)
The ETF is composed of 28 stocks based in Spain with a heavy concentration in the financials. The top holding, Banco Santander (NYSE: SAN) makes up 20 percent of the ETF and Banco Bilbao Vizcaya Argentaria (NYSE: BBVA) is the number three holding at 13 percent.
Both stocks are trading at multi-year highs after a recent rally, however they would need to more than double from current prices to get back to the pre-crisis levels.
If Spain were to continue its turnaround in the years ahead it would be reliant on the improvement in the financial sector. With EWP an investor has exposure to the country as well as the high beta financial stocks. Year-to-date the ETF is up 28 percent.
SPDR Euro STOXX 50 ETF (NYSE: FEZ)
The ETF is not a direct play on Spain, but rather Western Europe. The odds of the major European countries moving in the same direction is likely and by using FEZ it adds diversification throughout the region.
Spain makes up 13 percent of the ETF, while France (36 percent) and Germany (32 percent) are the two largest countries represented. The finance stocks are again the most heavily weighted, making up 27 percent of the allocation. The ETF is up 19 percent in 2013.
Telefonica (NYSE: TEF)
The company is telecommunications company that is the number two holding in EWP. Based in Spain, the company provides fixed and mobile communication services in both Europe and Latin America. The stock took a beating after the Euro zone crisis, but a recent surge has the stock up 33 percent in 2013 at a new multi-year high.
With a forward P/E ratio of 11.2 and a dividend yield of 4.2 percent the stock looks attractive. Of course there is a much higher risk with investing in an individual stock versus an ETF that has exposure to basket of stocks.
With money from Gates flowing into the country and billionaire Warren Buffett putting new money to work in the region it appears the turnaround in Spain could be in the early stages. A key to success is not to chase recent performance and to buy on timely pullbacks to begin building a position in the region.
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