International Investing

This ETF Provides Stability Overseas

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.

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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.

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.