By Carl Delfeld of Chartwell ETF and ETFfolio
ETFpickoftheweek
Here's my ETF pick for this week.
iShares MSCI Switzerland (EWL)
While only 137 miles by 216 miles in size, with a population of 7.2 million, Switzerland packs a punch and is a multinational powerhouse. Let’s take a quick look at the asset side of Switzerland’s balance sheet.
It has a strong currency backed by ample gold reserves, fiscal discipline, trade surplus and very little foreign debt. Outward looking, Switzerland has 40% of its gross domestic product attributed to exports. Switzerland represents the third-largest financial center in the world after New York and London. It is also home to world-beating pharmaceutical, engineering and food companies.
Switzerland enjoys a stable government, vibrant democracy and a reputation as an asset haven in times of stress. The Swiss have had a functioning democracy for 500 years and actually has a fairly weak central government, with a legislature that meets for only two weeks, four times a year.
Reasons for Selection:
1) In times of stress, investors flee to quality markets like Switzerland known for its fiscal discipline.
2) Currently, about 45% of EWL's holdings are concentrated in three great companies:
Nestle (NSRGY.PK)(19%)
Roche Holdings AG (RHHBY.PK) and (13%)
Novartis (NVS) (13%) all of which are pretty good defensive plays. Other top holdings include:
UBS (UBS) (5%)
Credit Suisse (CS) and (5%)
Zurich Financial.
3) I also like this ETFs sector breakdown led by Health Care 32%,
Financials 22%, Consumer Staples 19%,
Industrials 11%,
Materials 8%,
Consumer Discretionary 6%,
and Telecommunications 2%.
Catalyst: The Swiss franc is one of the most stable currencies in the world and performs well in times of financial turmoil.
Tip: If you are looking for just a currency safe haven, take a look at the CurrencyShares Swiss Franc ETF (FXF).
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