ETF Showdown: No Va

Remember when Chevy introduced the Nova decades ago and it became funny that a car was named for the Spanish translation of “don't go?” Well, this week's ETF Showdown is an intended example of no va, which is Spanish for don't go. At least don't go to either of these ETFs yet and you're about to see why. Folks, we're heading to Latin America for a south of the border showdown between the iShares S&P Latin America 40 Index Fund ILF and the SPDR S&P Emerging Latin America ETF GML. Obviously, this isn't the time nor the place to be getting excited about emering markets ETFs, especially the Latin America variety, but these would be two candidates to take a look at once the market gets its act together. When these funds say “Latin America,” they really mean Brazil and Mexico. Those two countries combine for 84% of GML's weight while they combine for 81% of ILF's allocation. Chile, Peru, and Colombia are the other LatAm economies represented in both funds. ILF wins the expense ratio battle at 0.5% compared to 0.59% for the SPDR offering. ILF also has $1.6 billion in assets under management compared to just over $125 million for GML. ILF trades over 2.1 million shares per day. GML boasts volume at just a fraction of that at barely over 24,000 shares per day. The AUM and volume discrepancies are difficult to digest when considering that ILF doesn't even hold 40 stocks (it holds 35), but GML is home to over 100 stocks none with a weight over 6.7%. ILF's top-two holdings, America Movil AMX and Vale VALE, account for over 23% of that fund's weight. It takes GML's top four holdings to get to 23% of that ETF's weight. Along with Ameica Movil and Vale, both funds are heavy on Petrobras PBR, Brazil's state-run oil producer. That downtrodden oil name represents roughly 10% of each ETF and if there were a big difference, given the way Petrobras has performed over the past 16 months, we'd prefer the ETF with the small exposure to Petrobras. At the sector level, materials, financials, staples, energy and telecom all get double-digit weights in GML. It's the same in ILF, but in this order: financials, materials, staples, telecom and energy. On the basis of superior diversity at the stock level, we anoint GML the winner of the this LatAm showdown, just don't take that as a buy recommendation. At least not right now.