I don’t know much about Peru, outside of the fact that they make some great ceviche and chocolate. But I’ve been thinking about the country a lot lately. That’s because the iShares MSCI Peru ETF (EPU) was one of the funds in our international universe to finish Wednesday at new highs, writes Steve Strazza, chief market strategist at AllStarCharts.
At first, I was puzzled by this. It was a sea of red out there. Everything got hit. Not just in the US, but across the globe. Then I looked at the fund’s holdings and realized how it happened.
EPU is basically a big basket of metals stocks. Roughly 50% of the fund is invested in materials. Here it is resolving higher from a multi-year base.
Gold and silver miners were the only stocks that worked Wednesday. Both of the shiny metals look fantastic, and I think silver is just breaking out now. EPU’s exposure to precious metals is precisely why it was able to stick the landing at new cycle highs despite the broad market selloff.
The more I think about that, I really like it. I got long EPU and I’m targeting 70.
I want all the international exposure I can get. I’m also always looking for uncorrelated assets. This offers a bit of that too, particularly in the current environment. We’ve had plenty of days this year where metals seem to be the only thing working. I think we’ll have more.
EPU also has some serious copper exposure with Southern Copper Corp. (SCCO), which is a chart I like right now. It even has a big bank anchoring the fund as the top holding, which is why it pays such a juicy 5% yield.
