VWO ETF

I am upgrading my rating on VWO from hold to buy due to improved fundamentals and technicals, despite questions about China's stimulus impact. VWO has shown strong performance, returning 20.7% since late last year, with a robust B+ ETF Grade and a high dividend yield of 2.55%. The ETF is well-diversified across sectors and has a favorable valuation with a price-to-earnings ratio under 14 and a PEG ratio barely above 1.

VWO, the largest and one of the more cost-efficient EM ETFs, but lagged global markets over the past year, by generating returns of only mid-single-digits. VWO's dominant regions - China and India, which account for 51% of the portfolio, are likely to benefit from better consumption trends, even as the dollar drops to 7 month lows. EM stocks look oversold relative to their global counterparts and can be picked up at cheap valuations.

International and emerging market equities currently trade with extremely cheap valuations and somewhat above-average yields. VWO is the largest emerging market equities ETF in the market. Although there is nothing significantly wrong with the fund, it compares unfavorably to EYLD in several key metrics.

VWO ETF has underperformed US and global equities in the past decade due to the decline of emerging markets. Investors were sold a growth story that did not materialize. I believe the Fund will continue to underperform in the future because emerging markets tend not to be shareholder-oriented and they carry a high political risk. Emerging markets are full of potential growth stories, but opting for a diversified Emerging Market ETF like VWO won't give you sufficient exposure to these opportunities.

Emerging Markets have a cheap forward P/E multiple of 11.6, making them compelling from a valuation perspective. Vanguard FTSE Emerging Markets ETF offers low cost and exposure to EM country stocks, but its technical situation remains weak. VWO has a large asset size, low expense ratio, and narrow bid/ask spread, but it has underperformed the US equity market and has weak price action.

Equity markets have seen strong, double-digit capital gains this year, with emerging market equities being an exception with weak, inconsistent single-digit gains. Despite recent underperformance, emerging market equities offer investors cheap prices and good growth prospects, making them a good buy for the future. Vanguard FTSE Emerging Markets Index Fund ETF Shares is an emerging market equities index fund, providing diversified exposure to said asset class.

The Vanguard FTSE Emerging Markets Index Fund ETF has reacted positively to the recent drop in US inflation and declining interest rate expectations. The VWO tracks the performance of the FTSE Emerging Markets index and offers exposure to large-cap EM stocks with a low expense ratio of 0.1%. Despite recent gains, the outlook for the VWO relative to bonds continues to deteriorate due to rising short-term bond yields and the widening gap between UST yields and the VWO's dividend yield.