This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Readers Find a Way to Play the Old Sod

Back to the Global Portfolio mailbag, this week with a Euroland twist.

My story last week on investment in Ireland triggered a great deal of reaction from readers who agree that Ireland offers more than turf and stout for investors these days.

Several readers brought to my attention that, contrary to what I wrote, there is, in fact, an Ireland-only mutual-fund play. While there are no open-end funds, the closed-end (IRL) invests at least 65% of its assets in Irish companies with the remainder in non-Irish companies that are affected by events in Ireland. Its largest holding is Allied Irish Banks (AIB). The fund's price has declined 3.6% this year, but it has risen 11% since a late-May low. Its performance in 1999 was a dismal minus 17%, but it had strong performances in 1997 and 1998, when it rose 34% and 20% respectively.

Currently the fund is trading at a steep 28.1% discount, meaning that the share price is that amount less than the net asset value of the fund divided by the total number of shares. Closed-end funds are baskets of stocks like other mutual funds, but trade on exchanges like individual stocks. Although the price of each share should equal the net asset value divided by the total number of shares, often the price will vary. When a discount on a closed-end fund is greater than 15% to 20%, many analysts think it represents a bargain because the price will eventually head back to parity with net asset value. Indeed, sometimes the fund managers will buy back shares to force it back towards its net asset value.

Many thanks to those readers who brought this fund to my attention.

Euro Trouble

Certainly one of the factors affecting Ireland and its investments has been the declining euro, which reached an all-time low last week and which has contributed to rising inflation in the country.

Moving beyond the Emerald Isle into the rest of Euroland, a reader, who asked to remain nameless, asks about funds that give equity or currency exposure to the 11 nations that comprise the European Monetary Union and use the euro as their single currency.

Although there are around 150 open-end mutual funds that invest in Europe, there is only one that focuses only on the countries that comprise Euroland: (GTGEX). It is up 5% this year, besting the average returns of other European stock funds by more than 4%, according to Morningstar. In addition, Barclays Global Investors recently offered the iShares MSCI EMU (EZU), an exchange-traded fund that is indexed to a Morgan Stanley Capital International index for the Euroland region. It has slipped 4% since it was introduced in July.

While the iShares MSCI EMU is a full Euroland play, the AIM fund is not quite one: It invests at least 65% in Euroland countries. In fact, two of its largest holdings are from countries outside the euro zone, U.K.'s Vodafone (VOD) and Sweden's Ericsson (ERICY).

Indeed, why one would want to exclude the noneuro countries is a good question.

"I'm not sure why anyone would want to own a Euroland fund," says Greg Wolper, international mutual-fund analyst at Morningstar. "You are excluding most of the top pharmaceuticals because they are in Switzerland or Britain." Excluding the U.K. would deprive you of exposure to Europe's largest equity market.

Nevertheless, there are some arguments for owning just the Euroland region. The single currency could translate into economic benefits for the region and promote higher growth. But right now, the strongest argument is that the euro has fallen so far that U.S. investors will benefit when it eventually rebounds.

Wolper doesn't buy that argument, though. "A lot would have to go right for that play," he says.
David Kurapka's Global Portfolio column appears Mondays, Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback and invites you to send it to David Kurapka .

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AIB $24.42 0.00%
EZU $31.08 0.00%
IRL $11.89 0.00%
AAPL $94.99 0.00%
FB $99.54 0.00%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs