TheStreet.com Ratings: Four Excellent Euro ETFs

Exchange-traded funds with an international outlook have enjoyed better returns than their U.S.-focused counterparts for several years now, a trend that TheStreet.com Ratings staff has been monitoring since June 2003.

For the period ended Sept. 30, our models indicate that from the universe of more than 800 closed-end funds that we rate -- which includes some 195 exchange-traded funds -- the top four performers are focused squarely on Europe.

Those four ETFs, in order of their ranking, are the iShares MSCI Austria Index Fund (EWO Quote), the iShares Belgium Index Fund (EWK Quote), the iShares MSCI Spain Index Fund (EWP Quote) and the iShares MSCI Sweden Index Fund(EWD Quote).

In addition to their European focus, these ETFs all carry a heavy weighting toward the banking sector in their particular regions.

Globally, the banking sector is performing well, and many of TheStreet.com Ratings' top-rated funds have substantial holdings in the area.

Investors who want to diversify into the European region may look at taking a position in each of these country funds. More risk-tolerant investors might want to limit their holdings to the Spain and Sweden funds, thereby investing in the two fastest-growing economies.

An alternative approach would be exposure to the Swedish fund only.

Let's look at fund performance as of Oct. 12. The four ETFs seek to provide results that correspond to the price and yield performance of their respective MSCI indices, whose returns also are shown.

The indices track the broader market of each country.

Euro Returns It's been lucrative to look overseas
Austria	Time Period	Performance
		EWO	MSCI Austria Index
	One-Week	1.52%	1.3%
	One-Month	4.92	4.73
	Three-Month	3.23	3.34
	YTD	15.91	15.53
	One-Year	23.88	22.9
	Three-Year	41.85	42.79
	Five-Year	35.98	35.12
Belgium		EWK	MSCI Belgium Index
	One-Week	0.37	0.57
	1 Month	6.13	6.13
	Three-Month	13.27	13.15
	YTD	26.18	26.81
	One-Year	32.92	32.58
	Three-Year	30.89	31.09
	Five-Year	20.73	18.93
Spain		EWP	MSCI Spain Index
	One-Week	1.17	1.05
	One-Month	8.35	9.16
	Three-Month	15.65	15.44
	YTD	34.2	34.42
	One-Year	33.33	32.45
	Three-Year	28.8	29.23
	Five-Year	22.2	21.44
Sweden		EWD	MSCI Sweden Index
	One-Week	2.51	2.6
	One-Month	8.05	7.68
	Three-Month	15.89	14.56
	YTD	25.95	25.31
	One-Year	33.89	32.09
	Three-Year	28.53	28.66
	Five-Year	20.53	19.61
Source: Bloomberg

Let's look at the sector allocations for each of these funds as of Sept. 30:

Sector Breakdown
EWO - Austria	Sector	Percentage
	Banks	24.52%
	Real Estate	14.73%
	Telecommunications	14.28%
	Energy	13.87%
	Materials	12.39%
	Capital Goods	7.80%
	Utilities	5.85%
	Insurance	3.50%
	Transportation	1.90%
	Consumer Services	0.94%
EWK - Belgium	Sector	Percentage
	Diversified Financials	33.30%
	Banks	23.14%
	Materials	9.12%
	Telecommunications	7.14%
	Food & Staples	7.04%
	Food Beverage & Tobacco	5.10%
	Real Estate	4.40%
	Pharma/Biotech	4.26%
	Consumer Durables & Apparels	1.46%
	Capital Goods	1.19%
EWP - Spain	Sector	Percentage
	Banks	38.59%
	Utilities	17.07%
	Telecommunications	15.47%
	Capital Goods	8.49%
	Energy	4.96%
	Food Beverage & Tobacco	4.03%
	Transportation	2.67%
	Retailing	2.49%
	Materials	1.38%
	Media	0.95%
EWD - Sweden	Sector	Percentage
	Capital Goods	25.92%
	Banks	18.89%
	Tech Hardware & Equipment	18.18%
	Materials	7.68%
	Retailing	7.61%
	Telecommunications	5.38%
	Consumer Durables & Apparel	2.68%
	Health Care Equipment & Services	2.52%
	Commercial Services & Supplies	2.06%
	Real Estate	2.01%
Source: iShares .com

While the iShares MSCI Austria Fund is currently our top-rated ETF due to its superior three- and five-year performance, there is growing evidence that there will be a changing of the guard in the coming months.

As the tables show, the iShares MSCI Sweden Index Fund and the iShares MSCI Spain Index Fund are both recording better short-term results. So if that trend continues, it is likely that either Sweden or Spain would take the top-rated spot from Austria, and that Belgium and Austria would rank third and fourth, respectively.

These funds, as noted, generally track the economic performances of their countries of focus, so let's take a look at some statistics.

A Macro Look
	GDP	Consumer Prices	Federal Budget	Current Account % GDP	Jobless rate	GDP Approximate
Austria	2%	1.8%	-1.4%	1.2%	4.6%	$307 billion
Belgium	2.8	1.2	0.7	2.7	8.6	$ 372 billion
Spain	3.7	2.9	1.1	-7.4	13	$1.12 trillion
Sweden	5.1	1.5	2.2	6	5.7	$359 billion

Spain has the biggest economy of the four countries, with a gross domestic product three to four times larger than the others, but Sweden boasts stronger economic figures.

Sweden's GDP growth rate is higher, its consumer prices growth is low, it has the highest federal budget surplus -- 2.2% of GDP -- and the highest current account surplus, at 6%. A jobless rate of 5.7% rounds out a very impressive set of economic statistics.