The following post may not be to everyone’s liking, but I still feel that emerging markets are primed for a rebound in the not so distant future. As a disclosure, not everyone should invest in emerging markets due to many factors, some of which are risk tolerance, investing time horizons, and how they fit in your overall investment strategy. Also, past performances are in no way an indication of what future performance may or may not be. But in this post, we will examine an exchange-traded fund that appears to have many positive qualities and has performed well over the approximate seven-year life of the fund.
Price History
The ETF in question is the Schwab Fundamental Emerging Market Large Cap Value fund with the ticker FNDE. The fund hit an all-time low in late April 2016 of 16.01 and an all-time high of $33.12 in January 2018. The average price of the fund over its lifespan is $25.75. The fund is fairly stable price-wise and exhibits this if you examine the charts and history of the fund. Currently, the fund is selling at $25.15 on August 14, 2020, close. However, the fund has lost approximately 15.20% on the YTD metric. But it has rebounded approximately 16.88% over the previous three months for a one-year return of 0.26%.
The Fund’s Makeup
So, now that we know the fund share price is relatively stable let us examine the fund’s management and investment style in some detail. The fund is mainly managed by two individuals who have been there since the inception of the fund, and they are Chuck Craig and Jane Qin. These fund managers have shown that they can produce good results and have the experience with the fund to lead it into the future as well. The fund focuses on large capital value investments throughout the global economy. Large and mid-cap value equities make up approximately 63% of the fund’s holdings, followed by 26.5% in large-cap blended equities. Sensitive and cyclical sectors make up 94% of the fund’s holdings. As to the global locations of the fund’s holdings, 64.5% are in Greater Asia, and that is broken down into 20.6% in developed Asia and 43.9% in Emerging Asian markets. Then the second concentration is in Greater Europe with .5% in developed Europe, 13.2% in Emerging Europe, and finally 7.9% in the Middle East/Africa. The Americas make up the remaining part of the fund with .5% in North America and 13.3% coming from Latin America.
Key Statistics
The fund holds 346 individual holdings with a relatively high asset turnover ratio of 32% and is considered an indexed fund. Expenses are relatively low at a mere 039% of assets, which for such a diverse value find is not a bad price to pay. With a weighted PE average of 9.6 and a forecasted PE of 10.7, the fund is priced as a value investment with growth potential. And with a 3.95% dividend yield, which is slightly above average, it shows promise for growth with a projected dividend yield of 5.91%. If one were to take the dividend yield payment into account, the fund has a good projected return over the long term. With a standard deviation of 21.59%, the fund would be considered fairly volatile, meaning it may not be the right choice for someone who is risk-averse or concerned about the potential loss of capital.
Emerging markets, like the rest of the global markets, have taken a hit with the COVID pandemic but have also made a decent comeback. With the fund being priced slightly below is the average price, it could be a decent buy if there is any pullback in the price. Regardless, even at the current price, it could be a good value for the right portfolio provided, it is within your risk tolerance and investment plan. Emerging markets should be a small portion of everyone’s portfolio to provide diversification, but only in the sense that it does fit within your investment plan. Being a volatile fund, the risks must be considered in conjunction with the possible reward that it could offer. And with much of the fund being invested in value equities and relatively high dividend yield, there is long term promise in the Schwab Fundamental Emerging Market Large Cap Value ticker FNDE.
If you have any questions about this fund or are concerned about your investments, contact me directly. As a fee-only Registered Financial Consultant that is Ethics Approved, I am here to assist you in achieving your financial goals. To sign up for our new and improved newsletter and some free finance tools, fill out the form below.
