Dear Mr. Berko:
My new broker recommended Finnish, Norwegian and Swedish exchange-traded funds for me, which I have listed here. What can you tell me about investing in those countries? I know what an ETF is but hope you can explain the terms “iShares,” “MSCI” and “capped” to me. As an alternative to these ETFs, could you also recommend two or three stocks from each of those countries? I am 58 and have $385,000 in my rollover individual retirement account, and this broker wants me to have $60,000 in foreign stocks. Is this a good idea?
— HD, Indianapolis
Dear HD: Most folks who roll over their retirement plans into an IRA are steered into high-commission, low-performance annuities by their brokers. Your broker is a keeper, and I like his conservative, long-term growth and income recommendations.
The 680 ETFs managed by BlackRock are branded as iShares, derived from “index shares.” So each of BlackRock’s 680 iShares ETFs tracks a specific bond or stock index. MSCI is the index created by Morgan Stanley Capital International that measures equity performance in a global ETF market. And “capped” refers to the weighting of the securities in an index so a single security doesn’t exert a disproportionate influence on it.
The iShares MSCI Finland Capped ETF (EFNL-$33.08) came public in January 2012 at $26. EFNL has a $37 million portfolio, yielding 3.46 percent, and those shares have traded between $28 and $38 in the past 12 months. Finland, with 5.5 million Fins and 3.4 percent unemployment, is a highly industrialized and globally integrated economy. Its per capita output is on a par with those of Germany, Belgium and France. And its government debt is rated AAA. Two Finnish issues that may do well this year are Fortum Oyj (FOJCF-$22.89) and Nokia (NOKBF-$8.26). NOKBF, founded in 1865, is a worldwide $16 billion advanced technologies business with 60,000 employees. Earning 95 cents a share, NOKBF trades at eight times earnings, and the 50-cent dividend yields over 6 percent. FOJCF is a $7 billion-revenue electric utility with 8,800 employees serving 2.8 million customers. FOJCF trades at a low five times its $4.43 earnings, and the $1.50 dividend yields 6.8 percent.
The iShares MSCI Norway Capped ETF (ENOR-$23.80) is a $27 million portfolio that also came public in January 2012 at $26 and yields 3.4 percent. In the past 12 months, ENOR has traded between $26 and $35. Norway, where all the men are tall and strong and all the women are blond and beautiful, has a 3.1 percent unemployment rate. It’s also considered to be the world’s least corrupt country, and its bonds are rated AAA by all three services. Two issues that may do well in the coming years are Telenor ASA (TELNF-$21.13) and Gjensidige Forsikring ASA (GJNSF-$16.91). GJNSF is a $3.5 billion-revenue banking and insurance empire with 3,500 employees. GJNSF earns $1.43 a share and trades at 15 times earnings, and the 70-cent dividend yields 3.5 percent. TELNF is a $16.5 billion media and telecommunications giant with 34,000 employees. It was founded in 1885. Analysts believe that it could trade in the low $30s next year, and the $1.18 dividend yields 5.4 percent.
I really like Swedish meatballs, and I also like iShares MSCI Sweden ETF (EWD-$33.20), which came public in 1996 at $14. The shares are not capped, but EWD yields 3.7 percent and has traded between $27 and $38 in the past 12 months. Sweden, with 10 million Swedes and an unemployment rate of 3.2 percent, is an export-oriented economy — primarily autos, engineering, pharmaceuticals, telecommunications and appliances — that most observers say provides the highest standard of living in the world. You might also consider H & M Hennes & Mauritz (HMRZF-$39.49), a $20 billion-revenue clothing and household products firm with over 3,200 locations worldwide. The $1.44 dividend yields 3.7 percent. Also consider Atlas Copco (ATLKF-$28.37), founded in 1875. It’s a $12.5 billion industrial products and solutions company that has an impeccable reputation for quality engineering and products. Its 83-cent dividend yields 3 percent.
––––––––––
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
© 2014 Creators.com
