I’ve just returned from The Oxford Club’s Austrian Wealth Retreat in Vienna.
Oxford Club Event Director Steven King did his usual terrific job in organizing the event, and longtime Oxford Club friend and lifestyle expert Fritz Satran made sure our group remained well-fed.
We stayed in the historic Hotel Bristol opposite the world-famous State Opera in the heart of Vienna. The Bristol’s previous guests include kings, presidents, artists and celebrities.
And as it was an Oxford Club Wealth Retreat, we also talked investing.
Steve McDonald, The Oxford Club’s Bond Strategist, peppered his outstanding presentation with his usual wit and always entertaining anecdotes.
As the Club’s ETF Strategist, I focused on exchange-traded funds (ETFs) – but with a distinctly local flavor.
I began by telling the audience a bit about our host city, Vienna.
Over the past 20 years, Austria’s capital has developed a reputation as one of the world’s top cities. Most recently, the Economist Intelligence Unit ranked Vienna the most livable city in the world.
As I walked around Vienna last week, I was struck by both its regal architecture and its prosperity.
Vienna’s impressive collection of royal parks and museums seems out of place in the capital of a small country of only 8.8 million people.
But as I reminded attendees, Vienna was once the capital of the vast Austro-Hungarian empire.
At the turn of the 20th century, this European giant was also one of the world’s thriving economies. Its second capital – Budapest – was the world’s fastest-growing city after Detroit, Michigan.
Vienna has been home to many of the world’s great intellectual and cultural icons.
It was the “City of Dreams” where Sigmund Freud developed his theory of psychoanalysis.
It was the “City of Music” where some of history’s greatest composers – like Mozart, Haydn, Beethoven, Brahms and Schubert – composed much of our classical music repertoire.
Vienna was also the birthplace of the Austrian School of Economics. It’s where economists like Ludwig Von Mises and Friedrich A. Hayek began their essential work.
(You can read about Vienna’s impressive cultural legacy in Carl Schorske’s iconic book: Fin de Siècle Vienna.)
I then turned to the topic of investing – and how a handful of ETFs make it possible for you to invest in both Austria and parts of Eastern Europe.
Today, Vienna acts as a gateway to the fast-growing economies of Eastern Europe, like Poland, Slovakia and the Czech Republic.
These former members of the East bloc are enjoying a golden age, growing at a rate of 3.8% per year. That’s far stronger than the 1.9% growth in Western Europe.
And whether you look at price-to-earnings (P/E) ratios, price-to-book (P/B) ratios or cyclically adjusted price-to-earnings (CAPE) ratios, Eastern European stocks are among the cheapest in the world.
Emerging European stocks as a whole trade at a P/E of 7.5, a P/B of 1 and a CAPE of 8.6.
By way of comparison, U.S. stocks trade at a P/E of 19.3, a P/B of 3.2 and a CAPE of 29.4.
Broadly speaking, emerging European stocks trade at a 60% to 70% discount to U.S. stocks.
I highlighted two ETFs that you can use to invest in the region’s strong growth.
The first is the iShares MSCI Austria ETF (NYSE: EWO), which has outperformed the S&P 500 over the past two years.
The second is the iShares MSCI Poland ETF (NYSE: EPOL). Poland is by far the largest of the Eastern European economies. It was the only European economy that did not fall into recession after the global financial crisis of 2008.
Now, you can have a long and happy investment life without investing in Austria or Eastern Europe.
But the simple fact that you can invest in this low-profile region highlights my favorite thing about ETFs: They give you the ability to invest in almost any asset class on the planet – including Eastern European stocks.
To conclude, I introduced attendees to my upcoming ETF trading service, Oxford Wealth Accelerator.
Launching this month, Oxford Wealth Accelerator will track ETFs similar to those I’ve mentioned here – as well as many others – in three separate ETF portfolios.
I’ll be discussing more about the Oxford Wealth Accelerator service in my next column…
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