A Simple Way to Profit From Europe and the Pacific
Nov 8th 2012 10:09PM
Updated Nov 8th 2012 10:16PM
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to diversify your portfolio with some large-cap stocks from Europe and the Pacific region, the Vanguard MSCI EAFE ETF (NYS: VEA) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.12%.
This ETF's performance has roughly been in about the middle of its category over the past five years, and it's up almost 11% so far this year. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 5%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
Why Europe and the Pacific?
Europe is in the middle of a prolonged financial crisis, which has depressed many of its stocks. Thus, they're more attractively priced now. They're not likely to rebound sharply for a while, but it's worth considering them while they're down. The Pacific, too, has experienced a slowdown.
Many European and Pacific companies had so-so performances over the past year, but they could see their fortunes change in the coming years. Toyota Motors (NYS: TM) bucked that trend, rising 23% over the past year. The company has a very strong reputation for quality and reliability in its vehicles, so some were troubled by a recent massive recall. The company is performing well, though, posting third-quarter results that feature strong growth in Japan, but a pullback in China, due to some anti-Japan protests and territorial disputes.
Banco Santander (NYS: SAN) gained 3%. Based in Spain, its earnings plummeted recently, as it got rid of many bad loans. On the plus side, though, it generates much of its revenue in Latin America, where economies such as Brazil's are in better shape and growing faster than many in Europe.
France-based oil giant Total SA (NYS: TOT) shed 2%, hurt not only by its exposure to Europe, but also by operating in some unstable areas, such as Iraq. It plans to boost its production by 30% by 2017, is shedding some non-core assets, and has invested significantly in renewable energies, as well, such as in solar power company SunPower (NAS: SPWR) . Compared to many peers, the stock seems undervalued.
Germany-based conglomerate Siemens AG (NYS: SI) rose 2%. It has also been battered by Europe's turmoil, but bulls see a promising future for it, as it can help other companies cut their energy costs. The company has been investing in the growing battery business, and plans to buy back up to $3.6 billion of its stock. Its fourth-quarter earnings featured U.S. sales up 18%, and the company has announced plans to cut nearly $8 billion in costs by 2014, and to sell some assets, as well.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
You don't even have to invest in foreign companies to profit internationally. Check out our free report, 3 American Companies Set to Dominate the World, to learn about three titans in our own backyard that do a lot of business abroad. Click here to get your free copy before it's gone.
The article A Simple Way to Profit From Europe and the Pacific originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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