The draw for the 2014 World Cup, which will be hosted by Brazil, Latin America’s largest economy, was unveiled Friday and that had football fans (or soccer in the U.S.) all over the world breathless with anticipation.
With the 2014 field believed to be the best ever, there are seemingly more “groups of death” than in previous years. For example, the U.S. will have to navigate Germany and Portugal (assuming a victory against Ghana) to make it out of Group G.
The “D” in Group D could stand for death as Italy, the Uruguay and the U.K. will vie for the top two spots to make it out of pool play. And there this is the so-called group of life or Group E, which includes 1998 champion France, where any two of the four teams could easily emerge.
Overall, there are 32 teams in the World Cup, 21 of which have at least one U.S.-listed country-specific exchange traded fund.
What follows is a list not of the 10 best ETFs from that list, but 10 ETFs for the countries with best odds of winning the 2014 World Cup. Odds are courtesy of William Hill as of Friday afternoon Dec. 6, 2013.
iShares MSCI United Kingdom ETF (NYSEArca: EWU)
Odds to win WC: 33/1
ETF YTD: Up 11.1%
Comment: As was noted earlier, England face a tough task advancing out of Group D. What has not been tough recently is being long U.K. ETFs. The U.K.’s third-quarter GDP growth was its best in three years, but much of that growth is being driven by domestic consumption as exports to the Eurozone remain slack.
If the pound falls, but British stocks remain sturdy, investors may want to have a look at the currency-hedged db X-Trackers MSCI Europe Hedged Equity Fund (NYSEArca: DBEU) and the WisdomTree United Kingdom Hedged Equity Fund (NasdaqGS: DXPS).
iShares MSCI Italy Capped ETF (NYSEArca: EWI)
Odds: 28/1
YTD: Up 8.1%
Comment: Italy have won four previous World Cups, the most recent in 2006, and an inspired runner-up finish at the 2012 European Championships could imply these odds do not reflect the potential for this team to be a real threat in 2014. Italy’s economy, the Eurozone’s third-largest, is still volatile though better off today than say two years ago. Stocks there are among the cheapest in the developed world. [Inexpensive Global Markets Delivered This Year]
iShares MSCI Netherlands ETF (NYSEArca: EWN)
Odds: 28/1
YTD: Up 20.3%
Comment: The Netherlands finished runner-up to Spain in the 2010 World Cup. Next year, the Dutch must contend with Spain in group play. In the world of ETFs, EWN has had a good year, but the Netherlands was recently stripped of its AAA credit rating by Standard & Poor’s. S&P now rates Dutch sovereign debt AA+. [Ten Best Europe Country ETFs]
iShares MSCI France ETF (NYSEArca: EWQ)
Odds: 20/1
YTD: Up 14.9%
Comment: France is the Eurozone’s second-largest economy, the 1998 World Cup Champion and the 2006 runner-up. France lost its AAA rating in early 2012 and last month, S&P took the country down another peg to AA from AA+. France has dealt with three downgrades since François Hollande took office as president in May 2012. The perceived sturdiness of the French banking system is critical to EWQ’s fortunes because the fund allocates almost 18% of its weight to financial services names.
Global X FTSE Colombia 20 ETF (NYSEArca: GXG)
Odds: 20/1
YTD: Down 16%
Comment: Colombia have never been the threat to win the World Cup that Argentina and Brazil have been, but in recent years, at least Colombia could say its equity markets topped those nations. That is not the case this year as Argentina is the better performer and although GXG has outperformed the comparable Brazil ETF, that is not saying much because GXG is still down 16%. GXG had a 12-day losing streak earlier this year.
iShares MSCI Belgium Capped ETF (NYSEArca: EWK)
Odds: 14/1
YTD: Up 14.8%
Comment: Belgium’s best finish in the past seven World Cups is fourth in 1986. EWK has been more impressive this year. The ETF allocates 57% of its combined weight to financial services and staples names, but even with the heavy staples allocation, Belgium also ranks among the least expensive developed markets.
iShares MSCI Spain Capped ETF (NYSEArca: EWP)
Odds: 7/1
YTD: Up 19.5%
Comment: For years, Spain had a reputation for never winning football’s biggest tournaments. The country has now won three in a row the 2008 and 2012 European Championships and the 2010 World Cup. To go along with those accomplishments, the “S” in PIIGS is seeing its equity market recover as affirmed by EWP. However, the country is still home to the Eurozone’s worst unemployment rate.
iShares MSCI Germany ETF (NYSEArca: EWG)
Odds: 6/1
YTD: Up 20.4%
Comment: The Germans are perennial World Cup contenders having finished no worse than third in the previous three tournaments. That steadiness has also been seen in German equities this year, which have been among Europe’s best performers. That has given investors an opportunity to take on some single-country risk in Europe without the volatility of a PIIGS ETF. Currency-hedged alternatives to EWG include the db X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR) and the WisdomTree Germany Hedged Equity Fund (NasdaqGS: DXGE). German small-caps can be accessed with the Market Vectors Germany Small-Cap ETF (NYSEArca: GERJ).
Global X FTSE Argentina 20 ETF (NYSEArca: ARGT)
Odds: 9/2
YTD: Up 10.4%
Comment: Argentina can boast of two factoids. First, ARGT is by far the top-performing single-country Latin America ETF this year. Second, Lionel Messi is arguably the best soccer player in the world.
iShares MSCI Brazil Capped ETF (NYSEArca: EWZ)
Odds: 3/1
YTD: Down 20.3%
Comment: The ETF for the host nation is to this point in 2013, the worst on this list and in a bear market to boot. Brazil’s recent third-quarter GDP report showed contraction for the first time since 2009. Compounding Brazil’s woes is the fact that emerging markets such as China, India and Mexico saw growth rebound in the third quarter.