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The best European ETFs for Q4 2022

by SuperiorInvest

Europe is home to some of the largest and best-known companies in the world, including Nestlé SA (NO), Volkswagen AG (VOW3) and SAP SE (SAP). Investors looking for broad exposure to the European market may consider buying exchange traded funds (ETFs). Europe-focused ETFs provide diverse exposure to companies in this market, which helps to mitigate risk often associated with investing in individual stocks.

Europe’s recovery from the economic shock caused by the COVID-19 pandemic has been uneven. Global energy and food prices have skyrocketed due to inflation, Russia’s invasion of Ukraine and other geopolitical factors. Some analysts expect a recession in Europe along with an impending energy crisis as winter approaches. But the European Union’s economy grew by a solid 4% in Q2 2022, easing fears of a looming recession.

Key things

  • The European stock market has lagged behind the US stock market over the past year.
  • The European exchange-traded funds (ETFs) with the best annual total returns are TUR, EWU and DBEU.
  • The largest holders of these ETFs are BIM Birlesik Magazalar AS, AstraZeneca PLC and Nestlé SA.

There are 37 European ETFs traded in the US, excluding inverse and leveraged ETFs as well as ETFs with less than $50 million assets under management (AUM). European stocks, as measured by the MSCI Europe index, have underperformed the US stock market over the past 12 months, total return -15.8% compared to S&P 500 total return -2.5% as of August 17, 2022. The best performing European ETF based on past year performance is the iShares MSCI Turkey ETF (TUR).

Below we examine the top three European ETFs based on performance over the past year. All numbers below are as of August 18, 2022. In order to focus on the funds’ investment strategy, the best holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds, except in unusual cases, such as when the cash portion is exceptionally big.

  • Performance in one year: -1.5%
  • Cost ratio: 0.57%
  • Annual dividend yield: 3.45%
  • Three-month average per day volume: 197,617
  • AUM: $285.4 million
  • Start date: March 26, 2008
  • Issuer: BlackRock Financial Management

TUR is designed to track the MSCI Turkey IMI 25/50 index, a broad-based index composed of Turkish stocks. The ETF provides broad exposure to companies based in Turkey. It’s one of the few ETF options to get that developing market economy. Industrials, materials and consumer goods are the sectors that receive the largest allocations within the fund. TUR follows a mixed strategy of investing in a mix of growth and value stocks primarily of large companies.

The top three TUR holdings are BIM Birlesik Magazalar AS (BIMAS.E: IST), operator of retail food and basic consumer goods; Eregli Demir Ve Celik Fabrikalari TAS (EREGL.E:IST), producer of iron and steel products; and Turk Hava Yollari AO (THYAO.E:IST), also known as Turkish Airlines, an international air carrier.

  • One year performance: -2.2%
  • Expense ratio: 0.50%
  • Annual dividend yield: 2.68%
  • Three-month average daily volume: 3,583,480
  • AUM: $3.5 billion
  • Start Date: March 12, 1996
  • Issuer: BlackRock Financial Management

EWU targets the MSCI United Kingdom Index, an index composed of large- and mid-cap companies based in the U.K. Many of the large-cap names in EWU’s portfolio are in various Europe-focused ETFs, but EWU still provides strong targeting. exposure to the UK stock market. The largest part of the fund’s portfolio consists of consumer shares, financial and energy shares.

EWU’s most important holdings include AstraZeneca PLC (AZN: LON), a British-Swedish biopharmaceutical company; Shell PLC (SHEL: LON), oil and gas company; and HSBC Holdings PLC (HSBA: LON), banking and financial holding company.

  • Performance in one year: -2.7%
  • Expense ratio: 0.45%
  • Annual dividend yield: 2.49%
  • Three-month average daily volume: 100,081
  • AUM: $514.9 million
  • Start date: October 1, 2013
  • Publisher: DWS

The DBEU seeks to track the US dollar-backed index MSCI Europe. The benchmark is designed to provide a close approximation of the returns that can be achieved security the currency exposure of its parent index, the MSCI Europe Index, against the US dollar. The ETF provides broad exposure to the European stock market but is hedged against the US dollar. This means that returns will be based solely on stock performance rather than stock performance plus currency fluctuations. The sectors that receive the largest allocations under the fund are healthcare, financials and industrials. Great Britain, France and Switzerland are the fund’s largest geographical exposures. DBEU uses a blended strategy of investing in a mix of value and growth stocks primarily big hat companies.

The three largest DBEU holdings are Nestlé SA (NESN: SWX), a multinational food packaging company based in Switzerland; dividend right certificates of Roche Holding Ltd. (ROG: SWX), a Swiss developer and manufacturer of pharmaceutical and diagnostic products; and ASML Holding NV (ASML:AMS), a Dutch developer and manufacturer of semiconductor manufacturing equipment.

The comments, opinions and analysis expressed herein are for informational purposes only and should not be construed as individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information contained herein to be reliable, we do not guarantee its accuracy or completeness. The opinions and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analysis contained in our content are provided as of the date of publication and are subject to change without notice. The material is not intended to be a complete analysis of all material facts relating to any country, region, market, industry, investment or strategy.

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