With the S&P 500 trading at just about the same level as it was a year ago, 2015 has turned out to be a very tough year for investors.
After enduring the sharpest correction since 2011, both U.S. and international markets bounced strongly.
Yet, as last week’s sharp pullback confirmed, they are still remarkably unsteady.
Of the 47 global stock markets that I follow on a daily basis, only 15 markets out of the 47 are up in 2015, with the U.S. stock market barely eking out a gain. And a mere five global stock markets have posted gains over the past three months.
Still, there are a handful of markets that have eked out double-digit percentage gains as we head into the home stretch and the last six weeks of trading in 2015.
What is perhaps the most surprising is that three of these markets — Denmark, Ireland and Belgium — have been strong performers over the past five years, with all three ranking among the top five performing global markets during the past half-decade.
What are some of the best stocks in these markets?
1. iShares MSCI Denmark (EDEN) — up 16.02%
Francis Fukuyama, the author of the classic “The End of History,” once told me that the eternal question among political scientists around the world is: “Why can’t we all be more like Denmark?” Democratic presidential candidate Bernie Sanders agreed, invoking Denmark and other Scandinavian countries as examples that the United States should aspire to emulate. That explains the curious ticker symbol — EDEN — for the Danish exchange-traded fund (ETF).
Investors in Denmark may be coming around to Fukuyama’s view, given the performance of the iShares MSCI Denmark Capped (EDEN) over the past few years. One reason for EDEN’s consistently impressive returns is its 35% exposure to the healthcare sector. The ETF’s largest holding, Danish pharmaceuticals giant Novo Nordisk (NVO), accounts for close to 22% of the fund’s weight.
The Danish economy is expected to grow by 1.6% this year, by 2.0% next year and by 1.8% in 2017. The European Union (EU) Commission forecasts unemployment in Denmark will also continue to decline from 6.1% this year to 5.8% in 2016 and to 5.5% in 2017. EDEN also benefits from Denmark pegging its krone to the euro, which provides the country’s currency with unique stability.
S&P 500 versus iShares MSCI Denmark Capped (EDEN)
2. iShares MSCI Ireland (EIRL) — up 14.60%
My article on Ireland for Marketwatch.com last week generated a lot of commentary and controversy when I suggested that economist Paul Krugman should “eat crow” after characterizing Ireland’s economic policies as a “sick joke.”
Naysayers notwithstanding, Ireland has become a poster child for the success of economic austerity. Government budget cuts, banking reforms and robust exports helped Ireland become the first economy among Europe’s PIIGS (Portugal, Ireland, Italy, Greece and Spain) to return to growth. Ireland was the first of the PIIGS to exit its bailout and is now on track to grow at 6% in 2015, making it one of the fastest-growing economies in the world. The country has consistently over-achieved its fiscal targets and reduced its government debt faster than expected.
The performance of the iShares MSCI Ireland Capped Investable Market Index Fund (EIRL) has been more than just a one-year wonder. In fact, its average gain of 17.33% during the past five years makes EIRL the best-performing single-country ETF that I have tracked over the same period with such a long track record. And only the iShares MSCI Denmark (EDEN) discussed above beats it over the past three-year period.
S&P 500 versus iShares MSCI Ireland (EIRL)
3. Market Vectors Russia ETF (RSX) — up 14.35%
Senator John McCain once dismissed Russia as “a gas station with a country attached.” Over the past 18 months, the Russian stock market has been hammered by the collapse in the price of oil and the growing costs of its increasing economic isolation and political adventurism.
At the same time, Russia is a value investor’s dream: it is both hated and cheap. In fact, Russia is the second-cheapest market in the world on a long-term Cyclically Adjusted Price Earnings (CAPE) basis.
Trading at a price-to-earnings (P/E) ratio of about 8.8 and a price-to-book ratio of 0.8, the Russian market trades at just over half of the level of the broader MSCI Emerging Markets Index. Gazprom, the world’s largest natural gas producer, trades at a price-to-earnings (P/E) ratio of 3.88.
S&P 500 versus Market Vectors Russia ETF (RSX)
4. iShares MSCI Belgium Capped ETF (EWK) — up 10.30%
You’d be hard pressed to find a European country with a lower profile than Belgium. I always associate Belgium with its high-alcohol beers like Duvel. More recently, it has unflatteringly crept into the headlines as the base of many of Europe’s home-grown terrorists.
Yet the iShares MSCI Belgium Capped ETF (EWK) has always been one of the steadier single-country European ETFs. Beer giant Anheuser-Busch InBev (BUD) accounts for a massive 24.5% of EWK — more than two and a half times the size of the next largest holding. That has put EWK in focus in recent months as SABMiller, the world’s second-biggest brewer, has accepted a takeover bid from Anhauser-Busch InBev.
In general, Belgian stocks offer political stability and modest economic growth in line with the EU. As the home to some dividend-paying global powerhouse companies, the Belgian ETF offers surprisingly solid returns, with its five-year average annual rate of return on 9.87% making it the third best-performing single-country ETF in the world over the past five years.
S&P 500 versus iShares MSCI Belgium Capped ETF (EWK)
In case you missed it, I encourage you to read my Global Guru column from last week about the differences between “foxes” and “hedgehogs” in forecasting developments in the market. I also invite you to comment in the space provided below.