India is one of the best-performing emerging markets this year. Up nearly 23% year-to-date, the WisdomTree India Earnings ETF (NYSE: EPI) proves as much.
That compares with a 5.57% decline by the MSCI Emerging Markets Index. EPI’s bullishness against other single-country emerging markets exchange traded funds this year is confirmation that methodology and holdings matter.
In terms of methodology, EPI tracks the WisdomTree India Earnings Index. That’s a fundamentally weighted index that only includes profitable companies that foreign investors can purchase. EPI components are weighted by earnings in the prior fiscal year. Regarding holdings, some EPI components are drawing rave reviews among some research firms. For example, Jefferies is positive on several EPI member firms.
Jefferies is bullish on “ICICI Bank — one of the largest private lenders in India. The analysts set a price target of 1,000 rupees for the stock, a potential upside of about 38.5% from its last close. The bank also likes Housing Development Finance Corporation, and has a price target of 3,480 rupees on the stock. That’s nearly 27% higher than Friday’s close,” reports Eustance Huang for CNBC.
Housing Development and ICICI Bank are EPI’s second- and fourth-largest holdings, respectively, and combine for over 8% of the ETF’s roster. Jefferies’ top pick among Indian equities is ICICI Prudential Life Insurance Company, a smaller member of the EPI lineup.
“Jefferies sees the highest potential upside for ICICI Prudential Life Insurance. The investment bank has a ‘buy’ rating on ICICI Prudential Life Insurance’s stock, with a price target of 830 rupees — more than 40% higher than its Friday close,” according to CNBC.
In the Indian energy sector, Jefferies likes Reliance Industries. That’s EPI’s largest holding at a weight of 7.53%. The financial services and energy sectors combine for nearly 42% of EPI’s weight, according to issuer data. The bulk of Jefferies’ preferred ideas among Indian equities hail from those two sectors.
EPI’s fourth-largest sector weight is technology at 13.34%, indicating that the fund has some leverage to what’s an increasingly vibrant tech and internet group in Asia’s third-largest economy — one that’s growing due to a bumper crop of initial public offerings (IPOs).
To its credit, EPI is beating the MSCI India Index by more than 500 basis points this year.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.