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ETF News And Commentary

The 2014 World Cup is starting in Brazil with the host nation taking on Croatia. The tournament will take place over the next month with the champion being crowned on July 13th in Rio de Janeiro.

While this is obviously a big, global event, personally, I am not much of soccer (or football if you prefer) fan. But, I am a huge fan of ETFs, and especially the many country funds that have taken over the market.

And thanks to the proliferation of ETFs in the past few years, there are now country ETFs for a wide variety of nations out there allowing us to have a ‘World Cup of ETFs’ featuring the funds for each nation (read Can FIFA World Cup Give Brazil ETFs a Kick?).

Who will win the 2014 World Cup of ETFs? Below, I have broken down the nations into their respective World Cup groups and I have highlighted the most popular ETF tracking each nation. Much like the real World Cup, two nations from each group will advance on to the next round.

Fortunately, all of the groups have at least two nations that have funds with Zacks ETF Ranks making it easy to get out of group play. For the Rank ties, we have chosen the funds with the best trailing three month performance to break the logjam.

Group A

Winner: Mexico (EWW - ETF report) - Zacks ETF Rank #3 (Hold)
Runner Up: Brazil (EWZ - ETF report) – Zacks ETF Rank #5 (Strong Sell)
Croatia: No ETF tracking this nation
Cameroon: No ETF currently tracking this nation

This was an easy group as EWW and EWZ were the only representatives. Unlike in the real tournament, Brazil has a Strong Sell Rank here so it may be difficult for the country in the next round.

Group B:

Winner: Netherlands (EWN) – Zacks ETF Rank #2 (Buy)
Runner-Up: Spain (EWP) Rank #3 (Hold)
Australia (EWA) Zacks ETF Rank #3 (hold)
Chile (ECH) Zacks ETF Rank #4 (Sell)

Netherlands, with its ‘Buy’ rank easily qualifies in this strong ETF group, but there was a tie for the #2 spot between Spain and Australia. Spain edged out Australia thanks to its win in terms of trailing three month performance, beating out EWA 7% to 5.6%.

Group C:

Winner: Japan (EWJ) Zacks ETF Rank #2 (Buy)
Runner-Up: Greece (GREK) Zacks ETF Rank #2 (Buy)
Colombia (GXG) Zacks ETF Rank #4 (Sell)
Ivory Coast: No ETF currently tracking this nation

Greece and Japan advance in this group, leaving Colombia, with its Rank of 4 or ‘sell’ in the dust. The ‘shoot out’ between the two left EWJ on top as that fund outperformed GREK in the trailing three months by a pretty wide margin.

Group D:

Winner: England (EWU - ETF report) Zacks ETF Rank #2 (Buy)
Runner Up: Italy (EWI) Zacks ETF Rank #3 (Hold)
Costa Rica: No ETF currently tracking this nation
Uruguay: No ETF currently tracking this nation

This was another easy group, though we did have to take some liberties with England. There isn’t a pure ‘English’ ETF so we went with the next best thing, the British ETF of EWU. No one has ever been able to explain to me why they split up the countries of the UK for the World Cup but not the Olympics anyway (also read Time to Bet on the British ETF?).

Group E:

Winner: Switzerland (EWL - ETF report) Zacks ETF Rank #2 (Buy)
Runner-up: France (EWQ) Zacks ETF Rank #3 (Hold)
Ecuador: No ETF currently tracking this nation
Honduras: No ETF currently tracking this nation

Two European neighbors advance out of this group, and one has a Zacks ETF Rank 2 (Buy). Good thing for the Swiss as the tie-breaker would have put France ahead as the trailing three month performance favors that country 3.4% to 2.6%.

Group F:

Winner: Nigeria (NGE) Zacks ETF Rank #3 (hold)
Runner-Up: Argentina (ARGT) Zacks ETF Rank #5 (Strong Sell)
Iran: No ETF currently tracking this nation
Bosnia and Herzegovina: no ETF currently tracking this nation

Another easy group, Nigeria wins while Argentina, despite its sell rank, manages to advance by default. Both of these ETFs have been very volatile, so it will be interesting to see how they perform in the next round.

Group G:

Winner: United States (SPY) Zacks ETF Rank #2 (Buy)
Runner-Up: Germany (EWG - ETF report) Zacks ETF Rank #2 (Buy)
Portugal (PGAL) No Rank
Ghana: No ETF currently tracking this nation

While most pundits aren’t expecting this to happen in group G down in Brazil, the U.S. manages to win the group in the World Cup of ETFs. The country edges out Germany thanks to a 4.05% gain in the trailing three months, barely beating out their 3.7% move higher (see all the Total Market ETFs here).

Group H:

Winner: Belgium (EWK) Zacks ETF Rank #2 (Buy)
Runner-Up: Korea Republic (EWY) Zacks ETF Rank #3 (Hold)
Russia (RSX) Zacks ETF Rank #5 (Strong Sell)
Algeria: No ETF currently tracking this nation

Russia may have had a chance here, but many are now bearish on the country thanks to its increased level of isolation. This left Belgium to win the group and allowed South Korea to advance in second place.

Round of 16

For the 16 remaining country ETFs, we have slotted them much like the World Cup bracket. The Winner of Group A plays the Runner-Up in Group B on one side of the bracket, and the runner-up in Group B plays the Winner in Group A on the other side.

The winners of groups play the runner ups of the following group alphabetically (winner C plays runner-up group D, winner E plays runner up F), while the runner ups in the groups play their counterpart winners (winner Group D plays runner up Group C, winner group F plays runner-up group E).

We use the same process that we did in the first rounds, focusing on the Zacks ETF Ranks and the trailing three month performances to determine the winners:

Mexico vs. Spain: Both of these ETFs currently have a Rank 3 so we look to performance to break the tie. Mexico comes out on top and advances thanks to its solid 11% gain in the past three months.

Japan vs. Italy: Japanese ETFs outrank their Italian counterparts, so EWY advances onto the next round to play Mexico.

Switzerland vs. Argentina: Switzerland easily beats up on Argentina thanks to the strong rank of EWL compared to the poor rank for ARGT (read Falling Peso Undermines Argentina ETF).

US vs. Korea: The Americans continue to make a dream run thanks to the strong rank of SPY relative to EWY. They will now play Switzerland in the quarterfinals.
 
Netherlands vs. Brazil:  The Netherlands, thanks to its strong ETF rank, is able to easily get past the host country and advance on to the quarterfinals.

England vs. Greece:  Both of these countries have seen their economies turnaround as of late and currently have Buy Ranks. However, thanks to a slump for Greece, England (the UK) easily wins and gets on to the next round to face the Netherlands.

Nigeria vs. France: Both of these country ETFs have Ranks of 3, so we have to go to performance as a tiebreaker. The emerging market easily beats out France since it posted an 11% gain in the trailing three month time frame.

Belgium vs. Germany: We also have a rank tie here as both of these funds have Zacks ETF Ranks of 2 or Buy. The Germans are able to sneak past Belgium though thanks to a 3.7% gain in the trailing three months.

Quarterfinals

For the eight country ETFs left, six months performance was used to decide the winners of the remaining matchups:

Mexico vs. Japan: This was a close battle as both of these markets struggled to start the year but have made some serious headway as of late. In the end though, Mexico is the winner thanks to its flat performance over the past six months compared to EWJ’s 1.2% loss in the same time frame (see 3 Incredible ETF Buys for Under $20).

Switzerland vs. USA: Both of these economies have been very strong, but Switzerland has found a niche in the middle of Europe. That has allowed EWL to beat out SPY in the past six months (10.25% to 8.9%), pushing the European nation ahead of the USA and into the semifinals.
 
Netherlands vs. England: The Netherlands and EWU (our proxy for England) were neck-and-neck for the first part of the trailing six month period. However, EWU pulled away and ended up well in front of the Netherlands and EWN to win 8.8% to 5.4%. 

Nigeria vs. Germany: In a three month performance comparison, NGE would have easily beaten out the Germans. However, with a longer six month look EWG and Germany are able to advance thanks to a 6.2% performance for Germany and a 5% gain for NGE.

Semi Finals

For the final four, we decided to look at the trailing one year performance to see who has the most momentum heading into the World Cup of ETFs. In the matchups, we have Mexico and Switzerland on one side, and England vs. Germany on the other.

iShares MSCI Mexico ETF (EWW) vs. iShares MSCI Switzerland ETF (EWL)

For this matchup, investors have EWW representing Mexico, and EWL representing Switzerland. Let’s take a closer look at these ETFs before we see the results:

EWW- One of the most popular Latin America ETFs out there, this fund sees about three million shares in volume on an average day, on AUM approaching $3 billion. Consumer staples, materials, and financials take the top three spots, while the biggest components here are America Movil, Fomento Economico Mexicano, and Grupo Financiero Banorte.

EWL- The Swiss ETF is often overlooked in favor of its bigger regional rivals, but this fund is still relatively popular with just over $1.1 billion in assets and average daily volume approaching 350,000 shares. Health care, consumer staples and financials dominate this fund, while the mega caps of Nestle, Roche and Novartis take the top three spots.

Trailing one year performance comparison: EWL up 19.45%, EWW up 4.41%, Switzerland ETF wins. The run for Mexico comes to an end while Switzerland advances on to the finals to take on the winner of the Germany vs. England matchup (see all the European Equity ETFs here).



iShares MSCI United Kingdom ETF (EWU) vs. iShares MSCI Germany ETF (EWG)

For this matchup, investors have EWU representing England (and the UK), and EWG representing Germany. Let’s take a closer look at these ETFs before we see the results:

EWU- The British ETF is also a very popular fund, as it does about 2.8 million shares of volume a day while it has over $4.3 billion in assets. Financials are the biggest component, trailed by energy and consumer staples. For the top components, HSBC Holdings is number one, followed by BP and Royal Dutch Shell.

EWG- One of the most popular country funds in the ETF world, EWG sees volume exceed three million shares on an average day while assets come in at the $6 billion mark. Consumer discretionary, financials, and basic materials take the top three spots in this well-rounded fund, while the three biggest components include Bayer, BASF, and Siemens.

Trailing one year performance comparison: EWU up 19.05%, EWG up 21.94%, Germany ETF wins. Germany beats out its European rival by a slim margin to advance on to the finals. The country will take on its neighbor Switzerland for the championship.



Third Place Game and World Cup Championship

For the third place game and the championship, we are looking to see which ETF has performed the best since the last World Cup ended in 2010 on July 11th. Whichever national ETFs had the better performance will be crowned the winners in their respective matches:

Third Place Game: In the third place battle, Mexico had a strong long term performance, but the recent volatility was too much to overcome. EWU finished ahead of EWW to capture third place thanks to its roughly 50% price gain since the end of the last World Cup.

For the championship: We have the Swiss taking on the Germans. While both of these European ETFs have outperformed their counterparts in the third place game, there was a clear winner since the end of the last World Cup; Switzerland. The fund gained nearly 70% since the last World Cup started, compared to a roughly 60% for the German ETF (see Switzerland ETF: Safest Play in Europe?).  

Congrats!

So based on our ranking system and recent performance, it looks like the iShares MSCI Switzerland ETF (EWL - ETF report) takes the 2014 World Cup of ETFs. While this probably won’t be the same result as what we see down in Brazil, hopefully this fun exercise has shown how many country ETFs there really are out there and how far the ETF industry has come in terms of its offerings.

Additionally, the process that I used to get down to the winners should highlight that many country ETFs have been performing strongly lately and could be poised for more gains in the future as well. So make sure to check out our ETF ranking system or sign up for our free fund newsletter for more information on the wide world of ETFs, no matter who you are rooting for in the real World Cup.

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Author is long EWG

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