State Street's International Small Cap ETF: Crawling SPDR With Potential

As I examine recent models on allocation, it is apparent that astute minds are reaching the conclusion that the United States is moving away from global military, economic and political dominance into what can be described as a slow descent into a victim-centric redistribution of wealth mentality, with third world environments in large areas of our metropolitan areas. What political entities are to blame for this decline are left for the reader to determine.

This post is to examine one ETF that will fit nicely into a higher percentage world investment allocation portfolio that is now touted by diversified allocation products. SPDR International Small Cap (GWX) is an excellent choice for a niche in a more global-centric investment scheme.

GWX seeks to replicate the total return performance of the Standard and Poors/Citigroup World ex-US Cap Range Under $2b Index. The Fund uses a passive management strategy and is non-diversified. Although the ETF is listed as a small-cap fund, in reality it looks as though about half the portfolio is mid-cap companies, with 49% true small-cap and the rest micro-cap.

Trading at $33.28 with an expense ratio of 0.59%, this ETF is actively traded, has a yield of approximately .95% and a cap rate of approximately $358m. Trading below its 200-day moving average, GWX is likely climbing from its 52-week low of $27.50 towards its high of $39.87. As the fund invests in developed countries, political risk is minimal.The lion's share of assets are in small-cap Japanese companies (29%). I believe that small-cap Japan is an excellent sector to overweight at this time. The U.K. and Canada each are approximately 11% of the portfolio with over twenty-seven developed countries represented.

The top holdings are as follows (none over .56% of the portfolio):

• Nippon Shinyaku
• Crescent Pt. Energy
• Hong Kong Finance
• Randgold Resources
• Nankai Electric Railroad
• Kas Bank
• Eldorado Gold
• Miyazaki Bank
• Meiji Dairies
• Invocare Ltd.

Surprisingly for a fund of this sort, the PE is only at 14.25 and the Price to Book is 1.55x.

GWX is not apt to either fall off a cliff or shoot to the stars. Instead, as with any solid Permanent Portfolio component, it should provide attractive long term results based upon its positions in smaller companies often overlooked in developed overseas investment environments. Importantly, it is a good product that would be too daunting to replicate on your own.

Disclosure: The author holds a position in GWX.

• Diversification Can Be Everything  »
• Replicating Portfolios with ETFs  »
• Covering Down Some of My Short Positions  »
• International ETF Update: Single Country ETFs, Latin America, Poland, and China-Taiwan Relations  »
• Made in Taiwan: 3 Funds for the Next Asian Market Bubble  »

This article has 4 comments:

• Panskeptic

  May 15 11:41 AM
  "a slow descent into a victim-centric redistribution of wealth mentality?"
  Astute minds, my foot. What kind of silliness is this?
  
  Yes, there are other people in the world that may occasionally impinge on one's own narrow greed, but we are not alone in our countinghouse, and our cultural heritage implies that we are to a degree our brother's keeper.
  
  The New Selfishness is no different from the Old. Please stick to investment commentary and spare us the whining about 1) having to share the planet with other people who may not care to be bossed around by us, and 2) sharing our country with some people not well off enough to require investment advice.
• smokey888

  May 15 12:47 PM
  I think you misunderstood his remarks and since you also decided to step outside the matters at hand, a comment: "and our cultural heritage implies that we are to a degree our brother's keeper" then sprinkled with pointed seasonings of being greedy!?
  
  Personally, I thought we had a healthy seperation of church and state but when 'our ('other') brother', BIG BROTHER dictates my charitable notions I'm convicted with no charges or jury as being greedy!?? In other words, do as I say not as I do is all I've seen from all those big political players with their millions in books and a great Wresz-Ko real-estate deal, environmental warming & the best one: a trial lawyer(s) sueing medical claims while touting universal health care. We already have had a failed round of insurance companies telling us how to be doctored now we think politicians can do a better job, ha! Oh, is there a small cap Value for Europe?
• Panskeptic

  May 15 06:00 PM
  I misunderstood nothing. Smicklas can have a global view of investing and a parochial view of everything else. The Republicans are against big government because they have no idea what to do with it, except enrich themselves and their cronies.
  
  You know, it's not a bad thing that a politician with money concerns him- or herself with the least fortunate. Must they be selfish and only defend their class? Comfort the comfortable and afflict the afflicted? Or are they allowed to actually figure out how to help children, seniors, folks who are being kept down so a small handful of well-connected bastards can prosper? The idea that you can only defend those in your own tax bracket is poisonous, and is wrecking this country.
  
  I'd rather have Big Brother helping the helpless than giving our tax dollars to the top 1%. It's called reverse wealth transfer, and we've surely had too much of that.
  
  If Smicklas doesn't want us discussing this stuff, he should have omitted his coy preamble and just written about the ETF. I presume he'll be more careful in future. This year may not be the best time to invest in European small/midcaps. I'd sure place a bid way under where it's trading right now.
• TAS

  May 15 11:59 PM

  My Website
  There was not a political statement in the post. If you were offended, check your political party affiliation. The author was talking about the importance of an Internatioal ex-US ETF, not the impotence of Panskeptic's toxic off-point remarks.

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