Active Beta ETF Eyes Europe

05/11/2017 2:45 am EST

Focus: ETFs

Carla Pasternak

Editor, The Income Investor

Goldman Sachs ActiveBeta Europe Equity ETF (GSEU) is a relatively recent fund launched last year. With total assets of just $32 million but over 400 different portfolio holdings, it's a small but well diversified fund, asserts Dr. Carla Pasternak, editor of Dow Theory Letters.

The fund invests in 15 developed European markets. The U.K., France, Switzerland, and Germany account for more than 70% of its country weightings.

Quarterly dividends, derived entirely from dividend income, amounted to $0.824 per share over the past year, giving a hefty yield of 3.0% of the current share price ($0.824/$27.45).

An expense ratio of 0.25% of assets is somewhat expensive but as an active beta fund it is more actively managed than other passive ETFs that track an index.

Year-to-date returns of better than 7% are somewhat lower than DFE's 9% but they were achieved with low 9% volatility.

We are impressed that weekly RSI is correcting from an overbought level and is now below 70, in contrast to many European equity ETFs that are still overbought.

For most of their trading history, the shares formed a base which bottomed at $22.93 in mid-2016 and found resistance at around the $26.50 level. The shares managed to poke above resistance in September 2016, but proved unable to break out.

However in February of this year, the shares again broke through resistance and have stayed above that $26.50 level for more than a month and a half. They spiked to $31.89 a few weeks ago, but have since retreated to a trading range above $27. The measuring principle projects a target of around $30 for the shares.

As mentioned, RSI is correcting an overbought condition even while the share price remains above new support. The MACD histogram looks to be weakening but it's still on a strong buy signal. The shares bear watching now that they are starting to come down from overbought levels on the RSI.

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