A Safer Way to Play Euro Emerging Markets

It's Not All Edelweis

Austria (and by extension EWO) has been steadily making new highs. The EWO is up 150% in the past two years, as opposed to most of Europe, which has been treading water. It is possible that the next move of 10% or more in the EWO is down.

Also, the largest component of the EWO is OMV, an oil company that has moved up about 200% in the last two years. If the energy sector has a substantial correction, I would expect OMV, and thus EWO, to participate to some degree.

Finally, Austria is a member of the European Union, and while growth across the region has been anemic, it has not held back Austria. That could change, but I believe that another reason Austria has done so well is because its economy is healthier than most of Europe. The best evidence of that is an unemployment rate of only 4.6% compared to 8.7% for the region (according to Bloomberg).

In sum, the tailwinds created by eastern European growth, systematic pension investment and the devotion of resources to Austria by more investment firms outweigh the potential risks outlined. To me, these themes are simple to grab on to and understand. Simple is often better.

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