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ECB Could Trigger Monster Rally in Spanish Stocks

There is no sugar coating this, so I'll give it to you straight: Spain's economy is a wreck.

The country's unemployment rate is fast approaching a quarter of the population, and business activity has ground to a halt. Just this week, Catalonia--one of its richest regions--had to go to the Spanish government and request a bailout--just as Spain itself will almost certainly be going to Brussels for the same.

It may surprise you that I consider Spanish stocks to be one of the most attractive investments in the world right now. Spanish stocks, as measured by the popular iShares MSCI Spain ETF (EWP), are some of the cheapest in the world, selling for barely 10 times earnings.

And even after the high-profile dividend cut of Spanish telecom giant Telefonica (TEF)--up until very recently the largest company in Spain by market cap--they are also some of the highest yielding.

But, being cheap isn't enough. After all, with the Spanish economy in the toilet, perhaps Spanish stocks should be cheap.

I would beg to differ. Due to linguistic ties with its former colonies and due to Spain having a relatively small domestic market, Spanish companies are some of the most globally diversified in the world. Many of Spain's blue chips get more of their revenues from Latin America than from Spain herself, which is exactly what I like to see.

And should ECB president Mario Draghi come through with his expected bond-buying spree, we could have a recipe for a monster rally in Spanish stocks.

I recommend investors pick up shares of EWP today and plan to hold for the next three to six months. But be sure to use a stop loss--say, 20 percent--in the event that the Eurozone starts to melt down again.

EWP Spanish Stock Investment


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About the Author


Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

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