That’s right folks, you can own Alibaba, JD.com, Yum China, MOMO Inc., Infosys, Ctrip, Baidu, New Oriental Education, 58.com, Baozun, Weibo, YY Inc. and other Chinese & Indian growth stocks without single stock exposure risk. First Trust introduced the First Trust Chindia ETF (FNI) in May 2007, but it has remained under the radar of most investors.
Fortunately, right now we can buy all these growth stocks at value prices. FNI is currently priced 17% below it’s 52 week high price. The all-time-high price for FNI was set on January 26, 2018 at a price of $43.90. FNI is currently trading at just $36.38. Is there more downside to go? Maybe. Does FNI have the potential to go back up to $43.90 and then some. Probably. To me, this is a risk/reward ratio that I can tolerate. Additionally, you get a 2.51% dividend while you wait for capital appreciation. A 2.51% dividend for growth stocks? I’d buy that.
All the stocks listed in the headline above and other China / India growth stocks can be found in this one ETF. Let’s see exactly what you get when you invest in FNI. Here’s the entire FNI portfolio with current weightings:
In order to get a better understanding of how this ETF works, let’s take a look at First Trust’s stated objectives and strategies for FNI.
- The First Trust Chindia ETF is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the ISE ChIndia Index™.
- Establish the total population of companies that are domiciled in either India or China and whose shares or ADRs are listed on a U.S. securities exchange.
- Remove companies that do not meet the component eligibility criteria which include minimum market capitalization and trading volume requirements.
- Rank the remaining stocks by their liquidity score. (Rank all eligible stocks separately by market cap and three month average daily dollar volume. Sum the ranks for each stock to get a liquidity score.)
- Select the top 25 stocks from each country by liquidity score.
- If less than 25 stocks are available for a country, then continue selecting stocks from the other country until a maximum of 50 stocks are selected.
- Weight according to the following methodology: top three ranked stocks in each country are weighted at 7% each. The next three in each country are weighted at 4% each. The next three in each country are weighted at 2% each and the remaining stocks are equally weighted.
- The ISE ChIndia IndexTM is rebalanced on the application of the above model on a semi-annual basis.
Here are some more pertinents and such that may be useful when evaluating FNI:
- Expense Ratio: 0.60%
- Inception Date: May 8, 2007
- Yield: 2.51%
- 52-Week Price Range: $34.66 – $43.90
- Average Volume: 32,000 shares/day
- P/E Ratio: 23.51
- P/B Ratio: 2.84
- Price/Cash Flow: 13.28
- Price/Sales: 1.92
- Morningstar Style Box: Large Cap Blend
Top Sector Exposure:
- Information Technology: 43.00%
- Consumer Discretionary: 23.49%
- Financials: 18.13%
- Healthcare: 4.08%
- Materials: 3.75%
- Telecommunication Services: 3.69%
- Energy: 2.20%
- Industrials: 1.66%
Well, there you have it folks. If you want growth stocks in your portfolio at value prices, consider putting some capital to work in the First Trust Chindia ETF (FNI). I’m not a market timer because I’m not good at it; but, when an ETF that I want to own, such as FNI, goes on sale, then I buy it. I cannot say this ETF will go up or down in the near future with any conviction. I buy ETFs as long-term investments. Based on my own due diligence, I believe FNI will be worth more in the distant future than it is today. In the meantime, I’ll collect the 2.51% dividend while I wait for capital appreciation.
Thank you for taking time to read this article. If you enjoyed it, you may like this related article I wrote about China ETF’s: Best Long-Term Performance China Equity ETFs
Feel free to share this article if you’d like to.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: We own shares of FNI and intend to buy more shares in the future. I am not a professional investment advisor. Perform your own due diligence or seek advice from a Registered Investment Advisor prior to investing in any security mentioned in this article.