Monday, June 3, 2013

Two European funds have moved into the top 10 to begin the week and both have been here before.  The 7th place iShares MSCI Switzerland Index Fund (EWL) has seen several trips to the elite ranks in 2013 and has largely kept pace with the S&P 500 until recent weeks.  The 5th place iShares MSCI France Index Fund (EWQ) has not ranked or performed as well until late April when it broke back into the top 10 and began to outperform.  The closely ranked funds track countries that share a border differentiating two distinct economies.

Switzerland is among the rare European countries with a growing economy which is reflected in EWL’s strong 79.2 Fundamental Score.  On the Behavioral side we see decent mid 60s scores but the fund’s lagging performance since early May has brought down its short term technical score even as its long term has improved.  That suggests the 4% correction since early May could be providing an attractive entry point.  Large companies in the heath care, consumer staples and financial sectors drive the fund’s 9.01 Green Diamond Reward Rating with only 2.11 Red Risk Diamonds.

They speak French in the western Swiss cantons but crossing the border will bring you to the poster child of too big to fail European states where recent efforts to bring fiscal balance to France have not met their objectives.  EWQ’s lagging performance this year reflects that but outperforming the market since mid April has helped the fund achieve a high Behavioral Score of 79.  More than the technicals though, that Behavioral Score is driven by a high 88.7 sentiment score suggesting the French shorts are overly exposed.  EWQ’s constituents are also large recognizable companies with financials and industrials comprising almost 40% of AUM.  It all combines for an also attractive risk reward spread with an 8.94 Reward Rating and a lower than average 3.54 Risk Rating.

Both funds have Total Quant Scores above 70 which we see in 11 funds today.  That number is about half the usual level but twice the recent levels as corrections in recent weeks have improved fundamentals.  Other European funds also saw moves up in their rankings over the weekend which could be a result of Friday’s late day selloff in the US or a more enduring move.  We will monitor the potential shift and thank you for monitoring ETF Globalsm.  Have a good week.

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