Emerging Europe's Top Trio: Poland, Greece & Turkey

06/09/2017 2:54 am EST

Focus: GLOBAL

Nicholas Vardy

Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

U.S. stocks have been the top-performing stock market in the world over the past three and 10 years. Such extremes inevitably “revert to the mean,” suggests international expert Nicholas Vardy, editor of Global Guru.

I am now more convinced than ever that we are in the early innings of a long overdue bull market in global stock markets.

Investors have long forgotten that between 2003 and 2007, emerging markets stocks were the single best-performing asset class in the world.

Among emerging markets, the best-performing region over the next five years is likely to be emerging Europe. That’s because “Emerging Europe" is the red-headed stepchild even among emerging markets.

While China and India together make up for 30% of the world’s gross domestic product (GDP), countries in emerging Europe rarely reach the size of average U.S. states.

There are three reasons to invest in Emerging Europe. First, markets are cheap. Emerging Europe as a whole trades at a CAPE ratio of 8.3 — a 73% discount to the S&P 500.

An incredible five out of the top seven cheapest markets in the world, as measured by CAPE, are in emerging Europe (Russia, the Czech Republic, Turkey, Poland and Hungary).

Second, investors hate emerging Europe. The thought of investing your hard-earned money in Russia or Turkey is unlikely to make you feel warm and fuzzy. From an investment standpoint, that’s a good thing.

How can you invest in Eastern Europe?  You can invest in the emerging Europe through the S&P 500 Emerging Europe ETF (GUR). However, I recommend you invest in individual country ETFs. Below are three Emerging European ETFs you can consider.

1) iShares MSCI Poland Capped ETF (EPOL)

Poland is the only Eastern European country with an ETF. It ranks #2 among 47 global markets I track daily. Its CAPE ratio is 11.4, and it is the fifth-cheapest market in the world. With $293 million in assets, EPOL is up 33.39% year to date.

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2) Global X MSCI Greece ETF (GREK)

You may be surprised to learn that this crisis-wracked country is the ninth-best performing foreign stock market ETF among 47 global markets in 2017. With $376 million in assets, GREK is up 21.95% year to date.

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3) iShares MSCI Turkey (TUR)

Turkey ranks #6 among the 47 global markets I track daily. With a CAPE ratio of 10.1, it is the third-cheapest market in the world. TUR has $409 million in assets and is up 24.36% year to date.

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The lesson is clear. Stock markets have their seasons. The U.S. stock market has been “in season” for the past decade. In contrast, global stock markets have been a terrible place to invest. 

I believe the seasons are now changing. If you want to generate more than a 4% real return in the U.S. stock market over the next decade, grit your teeth and go global.

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