Which ETF is the better investment for BRIC exposure, BIK or BKF?

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June 19, 2009 12:10pm ETF BASIC NEWS NYSE:BIK

bricWhat is BRIC? In economics, BRIC or BRICs is an acronym that refers to the fast growing developing economies of Brazil, Russia, India, and China. There are a couple of ETF options available to invest specifically on these specific countries the SPDR S&P BRIC 40 (BIK) and iShares MSCI BRIC Index (BKF).


Thomas Schumacher took a look to see which of these two funds seemed better. He used Volume, Dividend and Yield, Diversification, Valuation, and Options for comparison.

BKF took the lead out of the gates with fairly  trading volume , he found that “given BKF’s higher dollar price, the average value traded is rather significant. BKF beats BIK by more than a factor of 2. ” In terms of Dividends, the two funds tie, leaving BKF still firmly out front. He then looks at diversificationfinding, “BIK has 42 holdings while BKF has 176. BIK has approximately 50% of its holdings in the top 10% of the fund vs. BKF has 36% in the top 10%. Although both funds invest in Brazil, Russia, India, and China the weightings are slightly different, mostly due to BIK’s over weighting of China (49%) vs. BKF’s (35%) as well as BIK’s Russia exposure (21%) vs. BKF’s (13%). Sector exposure was virtually identical. ” Because of this, he likes to lean towards the more diversified funds  stating, “A 50% exposure to a single county that is only 1 letter in its acronym is a bit aggressive in my opinion and a country specific ETF would be a more appropriate choice. I would also expect that as a capital appreciation play, it makes more sense to gain exposure to a smaller tier of companies through BKF’s larger holdings quantity.”  The winner of this class turns out to be BKF, further cementing it’s lead.  With just two categories left, he turns to a comparison of  valuation. He uses older data taken from March 31st of this year, so there is a bit of a caveat for older data. He finds, “BIK’s Price/Book was .97 and Price/Earnings was 9.06 vs. BKF’s 2.43 and 14.32 respectively” and hands the win to BIK.

The final comparitive measure used, options, found BIK a winner stating, “BIK does have some outstanding option contracts, albeit few.” He does not recommend trading options in this market, but tip’s his hat to the effort.

Thomas awarded the winner, in a close race, to BKF stating that, “BKF’s diversification case held more weight than the other factors that allowed BIK to win. BIK had all the great benefits of an ETF, specifically option ability (barely), low fees and plenty of liquidity for most investors. However, BKF’s higher expenses and valuation was justified given it had significantly more holdings in smaller cap names relative to BIK.”

For Thomas Schuler’s whole story click: HERE

Related Story by Index Universe about YTD inflows into Broad BRIC ETFs click: HERE


Below is analysis of each through the Market Club smartscan Software:

SPDR S&P BRIC 40 ETF (PACF:BIK)
Smart Scan Chart Analysis indicates a counter trend rally is underway The current up-trend could be changing and moving into a trading range Sidelines Mode.Based on a pre-defined weighted trend formula for chart analysis, BIK scored +55 on a scale from -100 (strong downtrend) to +100 (strong uptrend):
     
-10 Last Hour Close Below 5 hour Moving Average
-15 New 3 Day Low on Wednesday
-20 Last Price Below 20 Day Moving Average
+25 New 3 Week High, Week Ending June 6th
+30 New 3 Month High in June
+55 Total Score

 

iShares MSCI BRIC ETF (PACF:BKF)
Smart Scan Chart Analysis shows that positive longer term is weakening. The market action could signal the start of a major trend change Weak Uptrend Very tight money management stops.Based on a pre-defined weighted trend formula for chart analysis, BKF scored +65 on a scale from -100 (strong downtrend) to +100 (strong uptrend):
     
+10 Last Hour Close Above 5 Hour Moving Average
-15 New 3 Day Low on Wednesday
-20 Last Price Below 20 Day Moving Average
+25 New 3 Week High, Week Ending June 6th
+30 New 3 Month High in June
+65 Total Score

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