With the Eurozone on the mend, Japan benefiting from the weaker yen and Chinese economic data improving, the time might be right for investors to consider “global gorillas,” as Morgan Stanley refers to mega-cap stocks with leverage to global growth.
The iShares Global 100 ETF (NYSEArca: IOO) is one ETF with which to play the global gorillas theme. The $1.3 billion ETF allocates 49.4% of its weight to the U.S., but even with that, the U.S. names found in IOO’s 102-stock lineup are far from domestically-focused plays. [iShares: Investors Playbook for Improving Global Growth]
Dow components Exxon Mobil (NYSE: XOM), Johnson & Johnson (NYSE: JNJ) and General Electric (NYSE: GE) are among the U.S. stocks in IOO’s top-10 lineup. International names include Nestle, HSBC (NYSE: HBC) and Novartis (NYSE: NVS).
At 0.9, IOO’s beta is slightly below that of the S&P 500’s and the ETF does trade at a discount to the benchmark U.S. index.
“We continue to believe that focusing on companies with global footprints, strong balance sheets, wide ‘competitive moats,’ proven management teams and significant free cash-flow generation is a winning strategy long term, particularly when they are trading at reasonable valuations,” according to the Morgan Stanley note.
Many of IOO’s holdings meet those requirements. Investors looking for a domestically-focused mega-cap ETF can consider the Guggenheim Russell Top 50 ETF (NYSEArca: XLG). Up 16.3% this year, XLG is home to the largest U.S.-based companies with Apple (NasdaqGM: AAPL), Exxon, GE, J&J and Google (NasdaqGM: GOOG) found among its top-10 holdings. XLG is up 16.3% this year.
Guggenheim Russell Top 50 ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Apple and Google.
Story updated to correct ticker for iShares Russell 200 ETF.