+ 3.90
+ 1.16%
+ 1.15
+ 0.28%
+ 0.84
+ 0.61%
+ 1.12
+ 0.69%

It Looks Like 2009 For This ETF

March 24, 2016 8:35 am
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If only we could summon Marty McFly and set the DeLorean to March 10, 2009. With the benefit of hindsight, investors know a simple S&P 500 exchange traded fund has returned just over 227 percent since then. Some ETFs have done much, much better.


The reality is a scant percentage of today's ETF universe is throwing off the kind of value it was in 2009. Not surprisingly, investors looking to capture 2009-esque opportunities would do well to look to emerging markets and ETFs such as the WisdomTree Emerging Markets High Dividend Fund (NYSE: DEM).


DEM's underlying index, the WisdomTree Emerging Markets High Dividend Index, makes good on the high dividend promise with a dividend yield of over 6.2 percent. The MSCI Emerging Markets Index has a trailing 12-month yield of 2.65 perent.


These days DEM is looking a little bit like it did in early March 2009. Back then DEM sported a “price-to-earnings (P/E) ratio of approximately 7.0x, which is one of the lowest points we’ve seen in the history of this portfolio,” said WisdomTree in recent research note. “Taiwan was the largest single country exposure at approximately 33%, followed by South Africa and Malaysia in the 10% to 11% range. It is notable that exposure to the BRICs broke down as follows: Brazil, about 8.0%; Russia, about 1.6%; India, less than 1.0%; and China, less than 2.0%.” 


Today, DEM sports a 10.5 P/E ratio and Taiwan is its largest country weight at 23.3 percent. China and Russia, two of the largest emerging markets dividend destinations, combine for over 27 percent of the ETF's lineup. Seven years ago, financial services and telecom stocks combined for about 40 percent of DEM's weight. That has not changed as that figure is nearly 39 percent today.


DEM has consistently been overweight Russia, by varying percentages, relative to competing emerging markets ETFs. That was a burden as oil prices slumped over the past two years, but with oil recently soaring, DEM's Russia overweight is an advantage as highlighted by the fact that the WisdomTree ETF is offering better than double the returns of the two largest emerging markets ETFs over the past 90 days.


“DEM is designed to track the performance of the WisdomTree Emerging Markets High Dividend Index before fees. The Index searches for valuation opportunities each year, using high dividend yields as the barometer. At a price approaching March 2009 levels, the critical question to ask is whether the risks in emerging markets today—which we agree are significant—are appropriately priced. If so, with an appropriately long time horizon, we believe in this asset class going forward,” adds WisdomTree.


Todd Shriber owns shares of DEM.

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