Emerging markets equities have been overshadowed for years now by the raw performance of U.S. stocks. That doesn’t mean investors should ignore the opportunities therein. Indeed, new research shows that emerging markets equities are seeing a historically wide discount relative to those U.S. stocks. That leaves an opening for an ETF like GSEE to offer some longer term appeal.
Key Takeaways:
- Emerging markets equities offer some real opportunities for investors right now, with one report suggesting a near two to one valuation discrepancy.
- Goldman Sachs’ GSEE ETF offers a straightforward solution to get that exposure, outperforming other offerings.
- Especially as U.S. concentration risk looms, the fund can help diversify while also delivering outperformance
A recent piece of analysis from Savvy Investor pointed to just that disparity, with that disparity previously covered on ETF Trends. After more than a decade of U.S. stocks outperforming emerging markets, driving capital out of emerging markets, U.S. equities now trade at 38 times earnings compared to 16 times earnings for emerging market stocks on cyclically adjusted price-to-earnings basis.
That could present an opportunity for the right ETF. The Goldman Sachs MarketBeta Emerging Markets Equity ETF (GSEE) charges a 36 basis point (bps) fee to track the Solactive GBS Emerging Markets Large & Mid Cap Index. The fund invests in mid and large cap emerging markets equities names.
GSEE, which hit its fifth year of operation last year, has consistently outperformed its ETF Database Category average. GSEE falls into the Asia Pacific Equities category in ETF Database data, producing strong long and near term returns.
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For example, the fund returned 38.2% over the last twelve months and 21.2% over the last three years. Both of those returns outperformed the Asia Pacific Equities category average. That average comes in at 28.5% and 13.5% respectively for those periods. Meanwhile, for this year, the fund has returned 23.2% YTD.
Together, that has lifted the fund’s price above both its 50 and 200-day Simple Moving Averages (SMAs). That traditionally indicates healthy momentum for a fund and a buy opportunity. For those who agree that diversification away from U.S. concentration risk into a historical valuation opportunity appeals, GSEE provides one keen example to consider.
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