International Investing

Dip into Major European Markets with This ETF

The Vanguard FTSE Europe Index Fund (NYSE: VGK) is an $18.26 billion exchange-traded fund (ETF) that tracks an all-cap index of developed European securities.

The FTSE Developed Europe All Cap Index tracked by VGK is a market-capitalization-weighted index that is made up of approximately 1,333 common stocks of large-, mid- and small-cap companies in 16 European countries. The fund holds stocks of companies specifically in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

VGK invests all, or the vast majority, of its assets in the common stocks included in the FTSE Developed Europe All Cap Index.

However, current headlines, especially about a potential a “no deal” Brexit, appear to be having a negative effect on the fund. VGK is down about 1% in the past month, with the fund allocating more than 23% of its assets to equities in the United Kingdom.

“Close to $177 million has left the Vanguard FTSE Europe ETF in September, after the fund suffered its biggest daily withdrawal in more than 10 months,” according to Bloomberg. “More than 23% of its holdings are in British companies, which still have little clarity on the nation’s future relationship with the European Union.”

European markets have been mired by political risks surrounding the ongoing Brexit talks, government finance in Italy and weak German growth. Notably, British lawmakers voted in September to once again delay the United Kingdom’s exit from the European Union.

Chart courtesy of StockCharts.com

The Vanguard FTSE Europe Index Fund’s top 10 holdings include Nestle SA (OTCMKTS: NSRGY), 3.51%; Novartis AG (NYSE: NVS), 2.06%; Roche Holding AG Dividend Right Cert (OTCMKTS: RHHBY), 2.03%; HSBC PLC (NYSE: HSBC), 1.53%; Royal Dutch Shell PLC Class A (NYSE: RDS.A), 1.29%; BP PLC (NYSE: BP), 1.27%; Total SA (NYSE: TOT), 1.26%; AstraZeneca PLC (NYSE: AZN), 1.23%; SAP SE (NYSE: SAP), 1.21%; and Royal Dutch Shell PLC B (NYSE: RDS.B), 1.08%.

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These top 10 holdings only make up 16.47% of the fund’s total assets, making it very diverse and thus potentially less volatile. With a share price currently sitting at $51.69, VGK has a 3.42% dividend yield and is up about 13% year to date.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.