VEU ETF: A cheap mid-teens price/E overcomes near-term technical concerns (NYSEARCA:VEU)

Foreign companies may finally be poised for their biggest earnings per share since 2009. According to data from Yardeni Research, the ex-US All World Index ( ACWX ) is forecast to post strong EPS. boost over the next 12 months. Nothing is set in stone, however, and a global economic downturn could certainly threaten the optimistic fundamental outlook.

The good news is that ex-US stocks are trading at bargain prices. The index’s forward P/E is just 13.3x, nearly eight times cheaper than the S&P 500’s earnings multiple. Additionally, price action has been generally favorable since October 2023 in the Vanguard FTSE All-World ex-US ETF Index Fund (NYSEARCA: YOU WILL).

I was bullish on the ETF again Januaryand I reiterate a buy rating today. Although there are concerns on the chart and as we are In the midst of a baj seasonal stretch, the VEU rating and cheap cost are positive features. The stock rose 11% total return from its previous valuation, slightly underperforming the S&P 500’s 13% advance.

EPS Forward Index ACWX reaches high recovery level

ACWX Index P/E Only 13.3x

right issuerVEU seeks to track the performance of the FTSE All-World ex-US index. Vanguard notes that the fund provides a convenient way to gain broad exposure to non-U.S. developed and emerging equity markets around the world through a passively managed portfolio construction strategy using index sampling.

VEU has grown slightly in size since my last Q1 review. Total assets under management are now $56.2 billion as of September 3, 2024, up from $53 billion at the start of 2024. Sports ETF a low annual expense ratio of seven basis points and its forward dividend yield is more than double that of the SPX at 3.0%. Stock price timing it’s been solid, but not euphoric, for the past few months. A weaker US dollar index in Q2 helped VEU keep up with US equities.

VEU also has a strong ETF risk rating by Seeking Alpha’s quant system, primarily due to somewhat modest volatility trends and a diversified allocation. finally, liquidity metrics they are robust given average daily volume of nearly two million shares and a 30-day average bid/ask spread of just two basis points.

Inspecting the portfolio, the Morningstar 3-Star Gold-Rated ETF sits along the top row of the style box, with an almost equal split between value, mix and growth. There is almost no SMID-cap exposure. For this reason, I include the Vanguard FTSE All-World ex-US Small-Cap Index (VSS) ETF in my portfolio for international non-large-cap exposure.

VEU is currently trading at less than 14x earnings, while its long-term earnings growth rate is solid at 11.1%, resulting in a cheap PEG ratio of 1.26x. The fund has moderate factor scores elsewhere.

VEU: portfolio and factor profiles

VEU provides additional diversification for U.S. investors, as the information technology sector, among the S&P 500’s worst performers over the past three months, makes up just 13.7% of the portfolio. This is more than 15 percentage points below IT’s weighting in the SPX.

Financials and Industrials are relatively overweight, emphasizing the ETF’s tilt more toward value and cyclical stocks.

VEU: Information on holdings and dividends

The canary in the coal mine today are seasonal bearish trends. I’ve been writing about it for a few weeks now, and the press is focusing more and more on it. September is off to a rough start for nearly all stocks, and for VEU, the final month of the third quarter has been lower in each of the last four cases and is down 2.8% when looking at the past decade.

So this is a short-term bearish catalyst that needs to be recognized. However, October and November saw better returns.

VEU: Bearish trends September

Technical takeover

With low cost, low valuation, strong diversification and weak seasonality, VEU’s technical situation is mostly decent. Notice in the chart below that the stock has rallied since hitting a low in October 2022. A correction in the third quarter of last year helped set the stage for a rally by last summer. Lately, however, we have seen weaker RSI momentum readings as VEU price has approached an uptrend resistance line.

Also, take a look at the longer-term 200-day moving average – it is rising, suggesting that the bulls are in control of the primary trend. With long-term resistance at the mid-2021 highs, there is a large amount of price-driven volume from there to $40. So, I’d like to see VEU reach new heights to clear the bar, so to speak. Long-term support is between $52 and $55 – that’s where VEU fell during the Tokyo black month in early August.

VEU is generally trending higher but works with short-term resistance.

VEU: Long-term uptrend, all-time highs, possible resistance

conclusion

I have a buy rating on VEU. I like its low valuation and diversification advantages for US stocks, while its technical trend is generally healthy from a long-term perspective.