Multi-factor ETFs are viewed as a growth frontier for the smart beta space. Advisors and investors have increasingly embraced multi-factor ETFs because timing individual investment factors, be it growth, low volatility, etc., is difficult. A multi-factor approach, such as the one set forth by DEEF, allows investors to remove the need for factor timing.
While DEEF offers exposure to an array of developed markets outside the U.S., the ETF is a credible play on rebounding European equities. Market observers project earnings per share growth for European stocks to remain strong and build upon the success over the first two quarters of the year. In the first half of the year, earnings upgrades were broad and far reaching instead of concentrated to specific areas. Since October 2016, trailing 12-month EPS of European stocks are up to double digits, and since July of last year, 12-month forward EPS expectations are up by a similar amount as well due to a strengthening global economy.
Even with the recent rally in European equities, valuations still look attractive relative to domestic stocks. On a forward earnings basis, European stocks have gotten cheaper continually since 2015, and price-to-book value for the region shows European names trading at a multi-year discount to the U.S.
DEEF holds almost 1,140 stocks and allocates nearly 44% of its weight to Europe.
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