NEW YORK (TheStreet) --Investing in Italy and the iShares MSCI Capped Italy ETF (EWI) - Get iShares MSCI Italy ETF Reporthas been a money loser for many years. According to Yahoo Finance EWI is down 26% on a price basis from 10 years ago and it is still down 57% from its pre-financial crisis high although it is up 11% in 2013.

Italy has been a basket case of corrupt and peculiar politics, bailouts and poor economic data like a 12.5% unemployment rate. While the country is a long way from being fundamentally sound there are signs that things may no longer be getting worse and at some point Italian equities will recover.

The variable to a recovery of course is time but when it occurs EWI will obviously be an easy way to capture the effect. Reasons to be encouraged that a recovery could be close at hand is news this week reported by MarketWatch that the Italian economy appears to have emerged from its latest two-year recession as the second- and third quarter GDP reports were both revised to unchanged from previously negative reports.

While it is still too early to declare a fundamental victory it may be true, as mentioned above, that things are not getting worse and based on the history of normal market function where equity markets are typically a leading indicator now could be the time for Italy and EWI.

Like many smaller markets, the financial sector is the largest at 30% of the fund. Energy is second at 23%, followed by utilities and industrials which each have 15% and consumer discretionary at 10%. The fund has no exposure to tech, health care, consumer staples or materials.

Also like funds that track smaller markets, EWI does take single stock risk by virtue of its 15% allocation to integrated oil and gas company ENI (E) - Get Eni S.p.A. Sponsored ADR Report and to a lesser extent its 7% weighting in bank UniCredit. The top ten holdings account for 65% of the fund.

Other details of the fund worth noting are its 0.53% expense ratio, its 1.99% trailing dividend yield and its beta which iShares reports at 1.67. The beta measurement means that for every percentage point that the S&P 500 moves EWI can be expected to move 1.67% which makes it very volatile relative to other country funds.

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The formidable difficulty in this type of contrarian investment is that there is no real fundamental or qualitative argument for buying Italy. Not getting worse is far from a ringing endorsement and the market is very expensive; iShares reports that the trailing price-to-earnings ratio for EWI is 33 compared to the mid to 15-16 times earnings for the US market.

Further weighing on the outlook is expectations from firms like Blackrock that expect developed markets in the Eurozone to continue to struggle under the weight of non-performing loans and weak demand for credit.

Baron von Rothschild supposedly said to buy when there is blood in the streets which is of course a contrarian idea. Making a very contrarian investment is very difficult because as washed out as the sentiment is and the various other blood in the streets elements to Italy it could continue to go down more.

For an investor who is feeling adventurous and contrarian, one strategy would be to establish half of a normal position now and then decide whether to fully commit based on what happens next. The trade might not work out but Italy is not going to zero and down 26% after ten years is compelling.

At the time of publication the author held no positions in any of the stocks mentioned.


This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.