While most investors attempt to time the market, the outcome is not always as they had planned.
Instead of buying on the dips and investing in value, investors will chase performance and often times buy near the high. The Cambria Global Value ETF (NYSE:GVAL) is looking to take away the process of identifying value plays around the world for the individual investor.
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This ETF is comprised of 100 stocks from both developed and emerging market countries around the world. The universe of countries to choose from starts at 45 and, based on Cambrias proprietary long-term valuation metrics, the number is narrowed down to the 11 countries. The countries that are currently in the portfolio include Greece, Russia, Ireland, Hungary, Spain, Austria, Brazil, Czech Republic, Israel, Italy and Portugal.
At first glance, it migth appear these countries are the whos who of economic and geopolitical uncertainty. All five countries that make up the group known as the PIIGS are represented in the ETF. While this may sounds risky, the PIIGS have been able to perform well over the last year after bottoming out. Both the Ireland and Greece ETFs recently hit multi-year highs.
Analyzing the top holdings in the ETF could be an issue for the average investor, as most of the names are companies that are not that well-known to U.S. investors. For example, Fyffes is the top holding with a 1.3 percent allocation. It is an Irish fruit and fresh produce company. The stock, which is traded on the London stock exchange, has risen over 60 percent in the last six months. All stocks must have a market capitalization of at least $200 million.
The ETF began trading on 3/12/14, and in that time has been able to move higher with the overall market. With an expense ratio of 0.69 percent, investors are paying a little more than the average for an index ETF, but due to the strategy behind the portfolio it is acceptable.
This is only the third ETF from Cambria Funds -- although they did have the tenth-best launch of all ETFs in 2013 with the Cambria Shareholder Yield ETF (NYSE:SYLD). Since it began trading in mid-May 2013, the ETF is up 18.4 percent versus a gain of 12.9 percent for the S&P 500.
Not only is Cambria an ETF company to keep an eye on, but based on the success of SYLD and the unique approach that GVAL takes, this newest ETF could be one of the big winners in 2014.
The biggest risk associated with the strategy GVAL implements is a bear market. If the tides turn and the bears take over the global markets, the countries represented in GVAL could be hit harder than their peers.
On the flipside, as a bear market ends, the most beaten-down countries should rally more than their peers. Considering the current state of the market, that should not be a deterrent at this time.
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