Here’s one way to get some diversified exposure to Europe as the region's stocks appear to be rebounding, writes Walter Frank of The MoneyLetter.

SPDR Euro STOXX 50 (FEZ) sits high among our top-ranked international stock funds. Indeed, at the end of 2012, the fund was sporting the best six-month return in the international group.

Euro STOXX 50 provides exposure to the largest blue-chip stocks in the Euro market. It is noteworthy that this fund excludes stocks from the United Kingdom and Switzerland, which are among the more stable markets in Europe. That means the Euro STOXX 50 has a greater exposure than most of its peers to some of the weaker nations, such as Spain and Italy.

The Euro STOXX 50 is further designed to select companies that basically represent the major sector categories, such as health care, information technology, energy, etc. At 25.3% of total assets, the financial services sector is by far the most heavily weighted in the fund. This hefty weighting increases risk at a time of weak sovereign debt quality, high loan losses, and rising capital requirements.

Consequently, the Euro STOXX 50 courts more risk than its typical peer. But as we know, the assumption of added risk can work to both the downside and the upside.

In 2009 and 2010—during the depths of the European financial crisis—the fund’s performance was near the bottom of its category. The fund returned to superior returns in the last half of the year, with financial firms swinging upward as confidence grew in the banking system. The Euro STOXX 50 finished the 2012 year in the middle of its category.

The positive momentum that emerged in the last half of 2012 is carrying over to early 2013. Financial services firms continue to lead the charge. Overall, the fund should be a good way to capitalize on recovery and increased stability in the Eurozone.

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Tickers Mentioned: FEZ

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