It is often said that stocks or other securities that appear inexpensive are that way for a reason and the reason is rarely positive.
At the end of last year, a decent amount of global equity markets accessible via single-country exchange traded funds were cheap as measured by the CAPE Shiller P/E methodology, which divides a benchmark index by the last 10 years of earnings for the index’s components after adjusting both for inflation.
As data from Mebane Faber’s Cambria Investments notes, investors that bought the ETFs of low CAPE countries at the end of last year have been handsomely rewarded.
Of the nine markets with lowest CAPEs at the end of last year, eight were accessible via ETFs at that time, and Portugal now has its own ETF with the recent debut of the Global X FTSE Portugal 20 ETF (NYSEArca: PGAL). Seven of the eight low CAPE ETFs have produced stellar returns this year with only Russia funds, which usually trade at discounts to the broader emerging markets universe, falling. [Oil Still an Issue for Russia ETFs]
The lead of the low CAPE ETF group is the iShares MSCI Ireland Capped ETF (NYSEArca: EIRL), which is up more than 35% this year. ETFs for three other PIIGS nations – the Global X FTSE Greece 20 ETF (NYSEArca: GREK), the iShares MSCI Spain ETF (NYSEArca: EWP) and the iShares MSCI Italy (NYSEArca: EWI) – have also impressed, as Faber’s data note. EWP, EIRL and GREK rank among the top-10 Europe single-country ETFs this year. [10 Best Europe ETFs]