Peet Serfontein and the FNB Investment Research Team
The Vanguard FTSE Emerging Markets ETF (VWO) is designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index, offering investors exposure to a broad and diversified collection of securities.
VWO is one of the largest emerging market equity ETFs globally and is popular among investors seeking exposure to emerging markets. It is a low-cost vehicle that can be utilised to invest in a diverse range of stocks from various emerging markets, providing a balance of potential growth and diversification to an investment portfolio.
Technically, the ETF is developing a symmetrical triangle pattern, which makes for a compelling investment opportunity (see the black converging trendlines on the main chart). This is a continuation pattern that signals a period of consolidation with the price then expected to break-out to the upside.
The ETF is trading just above its 200-day simple moving average of ~$40.30, which is supportive of a bullish bias.
Emerging upside momentum, according to the MACD indicator and the recent sideways movement of the on-balance volume (OBV) indicator also favours our bullish stance.
We suggest a medium at-risk allocation for this trade.
Share Information
| Share Code | VWO |
|---|---|
| Industry | ETFs |
| Market Capital (USD) | 75.4 billion |
| One Year Total Return | 9.20% |
| Return Year-to-Date | 1.17% |
| Current Price (USD) | 41.58 |
| 52 Week High (USD) | 43.10 |
| 52 Week Low (USD) | 37.46 |
| Financial Year End | - |
| The ETF price has added steady gains year-to-date, with several technical indicators pointing to further upside potential. |
Consensus expectations
FTSE EM Index (Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | - | 37.83 | 43.11 | 49.21 |
| Growth (%) | - | 13.95 | 14.14 | |
| Dividend Per Share (USD) | - | 17.70 | 16.74 | 18.27 |
| Growth (%) | - | -5.43 | 9.17 | |
| Forward PE (times) | 13.92 | 12.21 | 10.70 | |
| Forward Dividend Yield (%) | 3.36 | 3.18 | 3.47 | |
| Earnings growth expectations remain robust over the medium term. | ||||
Technical Analysis:
Long-term fundamental view:
| Share Name and position | EVNX - Stop loss (Close the position) |
LKQ - Take profit (Close the position) |
CARZ - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 11.78 | 47.92 | 53.61 |
| Current | 9.72 | 51.86 | 56.92 |
| Movement | -17.5% | 8.2% | 6.2% |
| The trade breached our stop loss level, and we closed the position. | We suggest taking an early profit on the trade, with the option to re-enter on a pull-back. |
An incomplete symmetrical triangle pattern remains of interest. The ETF remains above its 200-day moving average. Upside price momentum has regained some strength.
Our profit target remains at $60, with a trailing stop-loss at $54.80. Exit the trade around 22 May 2024. |
| Share Name and position | CVX - Buy (Continue to hold) |
DAY - Buy (Continue to hold) |
BDX - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 147.89 | 69.45 | 239.07 |
| Current | 155.43 | 71.79 | 243.62 |
| Movement | 5.1% | 3.4% | 1.9% |
|
The stock price is holding above key support, and this remains attractive. Upside price momentum is supportive.
Our profit target is $167, with a trailing stop-loss of $148.70. Exit the position around 28 June 2024. |
Note: Ceridian (CDAY) changed its name as well as its ticker to Dayforce (DAY) on 1 February 2024.
The stock is challenging the upper limit of an emerging symmetrical triangle pattern. The stock remains above its 200-day moving average. Upside price momentum supports the trade idea. Our profit target is $80, with a trailing stop-loss of $67.70. Exit the position around 8 May 2024. |
The presence of a well-established price range remains of interest. The stock is remains below its 200-day moving average. Upside price momentum supports the idea.
Our profit target is $265, with a trailing stop-loss of $234. Exit the position around 24 April 2024. |
