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A Buck Off the Irish

Richard Widows

Why not invest some of your green in the Emerald Isle, which is also known as the Celtic Tiger for its economic strength?

You could start with the one Irish beverage everyone has heard of. OK, maybe Guinness isn't a pure Irish investment play. The brewer merged with Grand Metropolitan in 1997 to form Diageo (DEO Quote), a globally diversified beverage company with brands such as Smirnoff vodka and Gordon's gin. And the company is based in London.

But Guinness is still considered a national drink of Ireland, and no matter where its corporate headquarters are, the dry stout was born and raised at St. James's Gate in Dublin and has been a mainstay in the country for almost 350 years.

However, if you want a more direct investment in Ireland, you might want to consider U.S. mutual funds.

The only pure Irish play in SEC-registered funds in the U.S. is the closed-end (IRL Quote)New Ireland Fund (IRL). Managed by Peter O'Donoghue, the fund exploded for a gain of 69.90% in calendar 2006 to follow up on annual advances of 63.55%, 41.97% and 13.18% in the years 2003 through 2005, respectively.

Although down slightly for 2007 to date as of the end of February, as was the case with many funds, the New Ireland Fund is graded A-minus by TheSteet.com Ratings; that equates with a buy recommendation.

As for the more common open-end mutual funds, 532 of them own Irish stocks. Because many of them have multiple share classes with identical portfolios, the total number of individual funds with Irish exposure runs well into the four figures. Together, the funds have an aggregate $13.67 billion invested in 95 different Irish stocks.

One table below shows the top 10 open-end funds by percentage of assets invested in Irish stocks; the second table has a similar number ranked by total market value of Irish portfolio holdings.

(LAICX Quote)The Columbia Acorn International Fund (LAICX), with nine Irish holdings totaling $316.8 million that make up 7.33% of its assets, appears on both tables. It is one of three Columbia Acorn funds on the two top-10 lists. Also appearing on both of the top-10 lists is the ( MAIVX Quote)BlackRock International Value Fund (MAIVX), with $287.9 million invested in Ireland representing 16.98% of its holdings.

As for diversification within the Irish market, as measured by the number of Irish stocks held, the (VEURX Quote)Vanguard European Stock Index Fund (VEURX) leads both lists with 19 Emerald Isle holdings. Among the total of 532 funds with Irish investments, the (GIXIX Quote)Gartmore International Index Fund (GIXIX) and the (MAIIX Quote)BlackRock International Index fund (MAIIX) also had 19 Irish stocks each in their portfolios. But the most Celtic-diversified U.S. open-end fund is the (DFCSX Quote)DFA Continental Small Company Fund (DFCSX), with 27 Irish holdings totaling $66.5 million and accounting for 3.53% of its portfolio.

Some well-known funds with names that might not indicate Irish investments appear in the bottom table of Irish holdings ranked by dollar amount. Although these Fidelity and American Fund offerings have significant dollars invested in Ireland, the amounts total relatively modest percentages of assets.

Still, Irish loyalists might appreciate the irony of the (AGTHX Quote)Growth Fund of America having close to a billion dollars invested in Ireland.

Perhaps most interesting about the two lists of funds with top Irish holdings is that the values in the one- and three-year performance columns are, for the most part, not shabby at all. The closed-end New Ireland Fund is not the only Irish play to receive a buy recommendation from TheStreet.com Ratings.

An impressive eight of the 10 funds on the top list earned grades in the A and B ranges, placing them in the buy category. There were no D or E grades in the top list, which would indicate sell recommendations. The bottom table, whose constituents generally have lower percentages of Irish holdings, contains six funds in the A and B ranges that equate with buy recommendations and only one D-plus grade, equivalent to a sell recommendation.

With a young, educated workforce, a balanced government budget and a slim corporate tax rate of 12.5%, Ireland has been an economic standout in Europe. The most recent forecast from the OECD (Organization for Economic Co-operation and Development) is for the nation's GDP to match last year's grow rate of 5.1% for this year and another 4.5% in 2008.

Following up on an advance of 2.8% in Ireland's consumer price index in 2006, the OECD forecasts a CPI increase of 2.8% in calendar 2007 and 3.0% next year. The OECD forecasts that Ireland's unemployment rate will remain unchanged at 4.4% -- among the lowest in Europe -- through the end of next year.