International investing has not been the hottest investing theme in recent years. However, markets are well known for working in cycles. In all likelihood, there will come another moment for international companies to shine. One way to take advantage of some of the best non-U.S. equities out there is through iShares MSCI International Quality Factor ETF (IQLT).
This fund invests in large- and mid-cap stocks outside the United States. It chooses its holdings based on a measurement of quality, and also weights its holdings on the same basis. What is meant by “quality” in this fund’s case is a combination of three metrics — return on equity (ROE), debt/equity ratio and earnings variability. So, in essence, these companies tend to have strong balance sheets and fundamentals.
Over the course of the last year, IQLT is up just over 2.5%. This is part of the reason this investment vehicle could be viewed as a contrarian play in the current market environment. Year to date, it is down 6.4%. A longer-term view shows annualized results averaging a gain of about 10%. The fund pays a dividend of 2.39% and has an expense ratio of 0.30%. The fund is highly rated on long-term resiliency and environmental, social and governance (ESG) factors.
Chart courtesy of www.StockCharts.com
Top holdings for this fund include ASML Holding NV, 3.92%; Roche Holding Ltd., 3.83%; Nestle SA, 3.43%; LVMH Moet Hennessy Louis Vuitton SE, 3.28%; and Novo Nordisk A/S, 2.64%.
The most represented countries in IQLT’s holdings are the United Kingdom, Switzerland and Japan. France, Canada, the Netherlands, Australia and Hong Kong also make up substantial portions of its investments.
For investors interested in high-quality international companies, whether as a speculation or to balance an existing domestic portfolio, iShares MSCI International Quality Factor ETF (IQLT) may provide an opportunity.
Of course, geopolitical risks are always a factor to consider when investing in stocks regardless of their country of origin, and that factor to consider can be magnified in the case of international companies. The Ukraine-Russia conflict is an obvious and immediate example of an issue that may cause market shakeups right now and should be considered in a diligent investor’s strategy.
