EWI: A Great Way To Visit Italy (From Your Portfolio) (NYSEARCA:EWI)

I’ve never been to Italy. Always wanted to go, honestly, just haven’t had the time yet. So, the best I can do? Consider Italy’s stock market. Lame — I know, but at least it’s something. The iShares MSCI Italy ETF (NYSEARCA:EWI) offers investors a way to tap into the Italian stock market. Launched in 1996, this fund aims to match the MSCI Italy 25/50 Index, which measures how mid and large-cap Italian companies perform. When you put money into EWI, you get a slice of various Italian stocks, giving you a chance to benefit from the growth of Italy’s economy, which ranks third in Europe by size.

When I think about Italy, I think of history, architecture, and pizza. But of course, there’s so much more.

A Look At The Holdings

EWI’s portfolio has 24 holdings, giving investors broad exposure to the Italian stock market. The fund’s top five holdings comprise about 45% of its total assets. There’s definitely some concentration risk here from that perspective.

What do these companies do? UniCredit, a big Italian bank, does business in 17 European countries. It offers many types of banking services. ENEL, a company that operates in many countries, has its main office in Rome. It stands out as one of the top players in electricity and gas worldwide. The company works in more than 30 countries where it makes, sends out, and sells electricity and gas to both regular people and big businesses. Everyone knows Ferrari — the famous Italian luxury sports carmaker. Ferrari means speed, exclusivity, and top-notch cars worldwide. Intesa Sanpaolo is a big Italian bank which stands out as a top player in retail, corporate, and wealth management services. And Stellantis is a multinational car company.

By putting money into EWI, investors get a stake in these industry giants, plus a wide range of other Italian firms across fields like utilities, manufacturing, energy, healthcare, and consumer goods.

Sector Compositions

EWI’s sector makeup shows the strong points and features of Italy’s economy. The fund puts the most money in Financials, which makes up 37.41% of its total assets. This big share highlights how key banking and insurance are in Italy’s financial scene.

The Consumer Discretionary (20.15%) and Utilities (16.38%) sectors follow as the next largest showing the strength of Italian firms in car manufacturing, high-end goods, and power industries. Energy (7.23%) Industrials (7.08%), and Healthcare (5.91%) make up other key sector allocations.

Peer Comparison

Although EWI is a go-to option for investors who want to get involved in the Italian stock market, it’s smart to compare how it performs and what it offers against similar ETFs. One fund worth comparing this against would have been the Franklin FTSE Italy ETF, but it got delisted, unfortunately. So the best we can do is compare this against broad Europe. When we compare EWI to the Vanguard FTSE Europe ETF (VGK), we find that Italy has broadly outperformed VGK, suggesting company specific relative momentum could continue.

Pros and Cons

Italy’s economy covers many areas, including cars, fancy goods, power, and more (including pizza). When you invest in EWI, you can tap into these fields and maybe profit from Italian companies as they grow. Italy’s geographic location gives Italian businesses access to many buyers and ways to expand. Italy ranks as Europe’s third-biggest economy. We shouldn’t ignore its ability to bounce back from downturns and grow, as it has done in the past.

However, keep in mind the risks that come with putting money into EWI. Italy’s economy has faced big problems recently, like high public debt, shaky politics, and slow economic growth. Furthermore, EWI invests a lot in the financial sector, especially banks. This could be risky. Italian banks have dealt with many issues such as bad loans and close looks from regulators. These issues could affect how well the financial companies in the fund’s portfolio do.

Investors should also keep in mind the currency risks that come with investing in EWI. Because the fund holds assets in euros, changes in the exchange rate between the euro and the investor’s home currency can impact returns.

Conclusion

Investing in the iShares MSCI Italy ETF gives investors a chance to get involved in the Italian stock market and take part in the growth potential of one of Europe’s biggest economies. With a diverse mix of mid and large-cap companies across different sectors, EWI offers an easy way to access Italian stocks. I know it’s nothing quite like visiting, but at least if it’s in my portfolio, it reminds me I need to go and check some of these companies out in the portfolio, in person. Ideally, with a pizza in hand.