A Door into the European Equity Market

M4D GROUP

The WisdomTree Europe Hedged Equity Fund (NYSEARCA: HEDJ) is an exchange-traded fund (ETF) that provides investors with exposure to the European equity market while also hedging against possible fluctuations between the dollar and the euro.

This exchange-traded fund is based off the WisdomTree Europe Hedged Equity Index that is designed to track the share price moves of dividend-paying companies in the WisdomTree International Equity Index that derive at least 50% of their sales from exports outside of the euro zone. The presence of a currency hedge also matters because there is always the possibility of large movements in the exchange rate between the dollar and the euro.

At a time when the German economy is in recession, the imminent deadline for Brexit is fast approaching and populist politicians and parties are gaining sway across the continent. With that backdrop, prospective investors in the European economy need all the protection that they can get.

The top 10 countries that this ETF is invests in include France (28.30%), Germany (24.52%), the Netherlands (16.67%), Spain (11.61%), Belgium (7.79%), Finland (4.91%), Italy (3.35%), United Kingdom (1.14%), Portugal (0.84%) and Austria (0.54%).

Among the fund’s top holdings are Banco Santander SA (NYSE: SAN), Anheuser-Busch InBev SA/NV (NYSE: BUD), Sanofi S.A. (NASDAQ: SNY), Unilever NV (NYSE: UN), LVMH Moët Hennessy Louis Vuitton SE (OTCMKTS: LVMUY), Daimler AG (OTCMKTS: DDAIF), BASF SE (OTCMKTS: BASFY) and Bayer AG (OTCMKTS: BAYRY).

Chart courtesy of StockCharts.com

The sectors that attract this ETF’s highest investments are consumer non-cyclical (20.81%), consumer cyclicals (18.36%), industrials (14.85%), health care (13.55%), basic materials (11.58%) and financials (10.88%).

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The fund currently has $3.36 billion assets under management and an expense ratio of 0.58%, meaning that it is slightly more expensive to hold in comparison to other exchange-traded funds. This fund’s performance has been quite good in the long and short runs. As of Oct. 22, HEDJ has jumped 0.65% over the past month and 1.74% in the past three months. It currently is up 21.87% year to date.

In short, while HEDJ does provide an investor with a chance to profit from the world of euro zone companies, the sector may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

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.