The Country Club: Your Passport To Global Opportunities

Editor’s note: This article is meant to introduce Nairu Capital’s new Marketplace service, The Country Club.

Since I began investing, I have always had a keen interest in single-country ETFs. There are a wide array of options that allow investors exposure to many hard-to-access markets, yet they garner little coverage from the investment media. I gained an interest in these funds because I realized that, over the long-run, their lower valuations and high growth potential should make for market-beating returns.

In fact, 60% of the total global market capitalization exists outside the United States. Average earnings multiples are nearly 21X for U.S large caps while just under 14X abroad. Of course, many find them understandably complicated due to their high exposure to foreign currencies and commodity prices. My goal in starting the “Country Club” is to change that worry into excitement.

In my opinion, now is prime-time to start to look for overseas investments. If you’ve invested in the United States this economic cycle you would have almost certainly outperformed the rest of the world. However, if you invested abroad from 2003 to 2007 you would have made 20-30% returns (all world indices) compared to only 10% at home (S&P 500)! Over a four year period, this equated to a 100% compounded performance difference.

Indeed, it appears that as the current economic cycle draws to a close, a new larger world of profitable opportunities may be waiting on the other side. Well-tested empirical research suggests that, given current valuations, overseas equities can be expected to outperform those of the United States by 3.5% per year over the next ten years. While that may not seem like much, it equates to ten-year compounded performance difference over 50%.

You could do the time-consuming work of performing fundamental analysis on individual overseas companies. However, differing accounting standards and legal structures make this difficult. Even more, many don’t have cost-effective access to overseas exchanges and require greater liquidity. That is where single-country ETF’s fill the gap. They typically have high liquidity and are traded on U.S exchanges.

Even more, with our approach, in-depth fundamental and macroeconomic analysis allows us to sift the market to find the likely best long-term performing countries. Let us do the heavy lifting required to find the “best of the best” global opportunities.

What is the Country Club?

The Country Club is my new Marketplace service, launched to focus on my passion for finding these international opportunities. Subscribers get multiple exclusive and, most importantly, actionable trade ideas a week, as well as full access to our research dashboard full of global economic and financial data. They also have access to our two model portfolios and will be provided with real-time alerts on portfolio changes. On top of that, they also receive our monthly “World In Review” that has in-depth commentary and analysis on all asset classes and coverage of recent global events.

Source: Pexels

Why the Country Club?

You have been offered many services that promise to “deliver exceptional results” via exclusive research ideas that are poised to “make a killing.” I prefer to be realistic. I have shared many ideas on Seeking Alpha, some have gone according to plan and delivered exceptional performance while others have not. My goal is to deliver true diversification and ideas with a strong risk-return profile. My promise is to do all that I can to help my subscribers to protect and build capital over the long-run.

Readers of my public articles get many good ideas, but what they don’t get is an actionable investing strategy to capitalize on those ideas. As a subscriber, you will get model portfolios to track those ideas and article updates when my opinion has changed that allow you to close at optimal times. You will also get research reports on many under-followed funds where I often find the best opportunities but lack the audience to make the article worth writing. Ideally, you will feel that you have gotten more than you expected.

My Approach

On one hand, I am a top-down analyst who uses macroeconomic data and trends to grapple with the short-term swings of foreign currencies and commodities. On the other, I dig heavily into the fundamentals of companies in the ETFs I analyze to assess their long-term potential and economic risks. While ETFs with foreign exposure may have more moving parts than what is found in the U.S, all of those moving parts can be used to generate excess returns with the right research. My goal is not only to provide you with such research but also with the tools to do it yourself.

What I have found writing on Seeking Alpha is that most people prefer to know simple key information that is unlikely to be well known or widely understood by the broader investor community. We live in a world with far too much information that it seems nearly impossible to find that key information.

There are relatively few key metrics that I have found to fit this suite. In my opinion, the best indicators or market direction can be found in interest rates and valuations. For example, the trend in the difference between the real interest rates of the two countries is one of the best currency indicators. Further, comparative valuation and equity performance between countries tend to mean-revert. By using simple measures that are derived from information the market is telling us, we can find robust indicators that many have become too distracted to use.

To me, time-frame is another key area of focus. I have found that many investors and analysts have a long-term thesis that is backed by fundamentals but are shocked when their investment delivers poor returns in the first months of allocation. When I give my audience an idea, I make sure to give them expectations over multiple time horizons.

For me, the best investments are the ones where returns look strong in both the short-run and the long-run. In the short-run, recent price performance and technical factors such as speculative or short positioning are my “key metrics”. In the medium term, I care about comparative valuations and sector positioning as it relates to the economic cycle. Over the long run, it comes down to long-run growth potential which, in my opinion, comes from institutional development and demographic trends.

To sum it up, my goal is to maximize the benefits of international exposure using fundamental “bottom-up” analysis while mitigating downside risk from the business cycle using macro-economic “top-down” analysis. At the end of the day, this approach is designed to steadily build capital over the long-run.

What exactly will I get with my membership?

Access to two model portfolios: Our two portfolios of ETFs are designed to capture global opportunities in a risk efficient manner. One is a more conservative long-only strategy and the other allows for short-selling to take full advantage of the economic cycle. Both may contain the occasional currency ETF position in order to mitigate risk.

The Country Club Dashboard: The Dashboard is a live updating service that gives you detailed maps of global economic and financial statistics. It is hosted via Google Sheets and lets you see valuation multiples, equity/currency performance, and economic data for each country in clear easy-to-understand maps.

Exclusive Research Ideas: Members will receive at least two in-depth ideas a week featuring long or short ideas regarding a specific country or region of the world. These will include analysis of valuation, sector weighting, local currency performance, economic news, and geopolitical factors.

Monthly Newsletter: A long in-depth monthly newsletter at the beginning of each month detailing global equity performance, pertinent geopolitical news, and economic cycle estimation. This service is designed to help our clients not only in making investment decisions but also in their professional life.

A Quick Note About Nairu Capital

My name is Harrison Schwartz and I started Nairu Capital in 2018 with the goal of changing the way exchange-traded funds are covered. I have found that most ETF analysis focuses too much on passive potential and not enough on alpha-generating active strategies. I have worked in private equity, global macroeconomic research, and have an academic background in quantitative analysis. My goal in investment research is to combine all of these experiences into a useful product that my audience enjoys.

If you’re curious, the name is actually a bit of a joke. “Nairu” comes from the Economic acronym for “Non-Accelerating Inflation Rate of Unemployment”, or the theoretical level of unemployment where inflation is stable. Have you ever witnessed stable inflation and employment? Me neither. My joke is that the markets are never in “equilibrium”, but as an analyst, I’m trying to push them toward it. Thus, “Nairu Capital” was born.

Introductory Offer, Limited Time

As an investor, you understand that risk is as important as reward. That is why we want you to try the Country Club for free and see if it works for you. You can read our latest monthly report and ideas as well as view our model portfolios.

To make it even more exciting, we want to offer a discount to our first 30 subscribers who can sign up for only $29 per month or $239 per year. After those spots are filled prices will go up! Sign up here to get started.

Best,

Harrison Schwartz

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.