ETF Talk: Eyeing GEMS for Your Portfolio

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

When I look for an investment opportunity, I am particularly interested in recovering markets. That’s why I was intrigued when Fed Chairman Ben Bernanke’s announcement on quantitative easing spurred a sell-off in global and emerging markets earlier this month.

As a result, I have found an exchange-traded fund (ETF) that taps into a diverse group of emerging markets, the EGShares Technology GEMS ETF (QGEM). This fund invests nearly 90% of its resources in emerging markets in Asia, Africa and South America. Chinese holdings lead the way at 49.15%, followed by Indian holdings at 29.01%. QGEM also invests 3.48% in Thailand, 2.88% in Chile, 2.64% in Indonesia, 2.28% in South Africa and 1.50% in Turkey.

The emerging market index, which includes stocks from all of these countries, looks ripe for a recovery due to its abnormally low P/E ratio. QGEM, on the other hand, already is nicely situated at a 16-to-1 P/E ratio, but this ETF has holdings in key countries that will benefit from such a rebound. QGEM should be well ahead of the emerging market surge.

As indicated by the chart below, QGEM has risen 26% during the last year through a wide variety of conditions. The fund also offers a 1.97% dividend yield.


International stocks form 96.9% of QGEM’s portfolio. The top 10 holdings, nine in developing economies and one in Russia, comprise 57.08% of the total assets of the fund. The largest is Tencent Holdings, with 10.41% of the fund’s assets, followed by Baidu Inc., 7.95%; INFOSYS LTD, 7.83%; TCS LTD, 6.48%; NetEase Inc, 4.62%; Lenovo Group Ltd., 4.55%; Sina Corporation, 4.24%; Wipro Ltd. GDR, 3.79%; Group Ltd GDR, 3.75%; and Shin Corporation Public Co. Ltd, 3.48%.

As indicated by the name of the ETF, these holdings primarily focus on one sector: technology. Indeed, 86.05% of QGEM’s portfolio is invested in that sector, followed by 10.35% in communication services and 3.6% in industrials. Considering that this concentration is spread across China, India, Thailand, Hong Kong, Russia, Chile, the United States, Turkey, Indonesia, South Africa and Poland, QGEM is an incredibly diverse investment. I encourage you to look into QGEM so you can profit as the emerging markets recover.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.

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