Market Overview

Checking In: Should Investors Consider the Lone Irish ETF?


Sure, it's Valentine's Day, but why not have a look an ETF that is most appropriate for St. Patrick's Day? That could only mean the iShares MSCI Ireland Capped Investable Market Index Fund (NYSE: EIRL), the lone ETF devoted to Ireland.

In less than three months, the iShares MSCI Ireland Capped Investable Market Index Fund will celebrate its second birthday. Arguably, that's impressive because the world knows times have been tough for the PIIGS since mid-2010 and probably before that.

Candidly, it wouldn't be unreasonable to say that if EIRL came to market courtesy of smaller ETF issuer, it might have already been put out to pasture and closed. iShares is the the world's largest ETF issuer. The firm had almost $483 billion in U.S. ETF assets under management at the end of January, according to the ETF Industry Association.

Said differently, it's not a big deal to an ETF sponsor that has the heft of iShares that a couple of funds here and there fail to attract robust inflows from investors. Less than 90 days short of its second birthday, EIRL has just $7.4 million in AUM. That's well short of the $50 million in two years many ETF experts argue is necessary to ensure a fund's survival.

EIRL's AUM total is also well short of other PIIGS ETFs such as the iShares MSCI Italy Index Fund (NYSE: EWI) and the iShares MSCI Spain Index Fund (NYSE: EWP). The Global X FTSE Greece ETF (NYSE: GREK) has raked in almost $2 million in AUM in just two months of trading.

To its credit, EIRL has not been a lost cause in 2012. In fact, the lone Ireland ETF is solidly in the green to start the year. Of the four ETFs specific to PIIGS nations, remember there is no Portugal ETF, EIRL is the second-best performer year-to-date, having walloped EWP while narrowly surpassing EWI. All three have been trumped by GREK by a wide margin.

The good news about EIRL in terms of sector composition is that financials only account for 7.83 percent of the fund's weight. Then again, that might not be the best news if European bank stocks rally.

The reality is EIRL's fortunes are intimately tied to three stocks: CRH Plc (NYSE: CRH), Elan (NYSE: ELN) and Kerry Group Plc. That trio represents 43 percent of EIRL's weight and that's a hefty concentration among just three stocks in an ETF that only has 21 constituents.

Latecomers that feel as though they've missed out on something with EIRL this year might do well to wait for a pullback to see if the $20 area acts as support. Another option is to wait and see if the 50-day moving average cross the 200-day line for the famous Golden Cross.

And use limit orders with EIRL. The bid/ask spread as of this writing is 15 cents and that's the unfortunate lay of the land with some thinly traded ETFs.

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