EFA, iShares MSCI EAFE ETF, is a large and mid-cap ETF holding developed market equities, excluding the U.S. and Canada. As we share in the SimpleVisor Factor Analysis below, EFA is currently the hottest stock factor.
The likely explanation for its outperformance is the weaker dollar. As we share in the second graph below, the dollar index sits on critical support while the S&P 500 bumps up against resistance. If the dollar breaks lower, it is likely foreign developed market stocks will continue higher. To help prepare for that potential, we downloaded the 100 largest stocks in EFA and ran their correlation versus the dollar over the last two years.
The table below shows the five stocks with the most negative correlation to the dollar. All five companies are major, well-known companies. Their stocks trade on liquid foreign exchanges as well as on U.S. exchanges.
Screening Criteria
We considered the following factors when screening:
- Market Cap > $100 billion
- A Holding in EFA
- Foreign Domicile
Company Summaries
SAP SE (SAP)
ASML Holding N.V. (ASML)
LVMH Moët Hennessy – Louis Vuitton, Société Européenne (LVMUY)
Rio Tinto Group (RIO)
Banco Santander, S.A. (SAN)
Five for Friday
Five for Friday uses stock screens to produce five stocks that we expect will outperform if a particular investment theme plays out in the future. Investment themes may be relevant to the current or expected market, industry and/or economic trends. Investment themes may not always represent our current forecast.
Disclosure
This report is not a recommendation to buy or sell the named securities. We intend to elicit ideas about stocks meeting specific criteria and investment themes. Please read our disclosures carefully and do your own research before investing.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.
Follow Michael on Twitter or go to 720global.com for more research and analysis.
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