Recently, we reviewed our reasons for owning each position in our portfolio. As is our habit, when the original reason for ownership no longer exists we sell the position.
Consider the case of the Wisdom Tree European Small Cap Fund (DFE). Back in October of 2013, I spelled out my reasoning in a post for adding the Wisdom Tree ETF to our portfolio.
In 2009, we began to believe the European banks had not come clean on their financial woes. At that time we decided Europe would solve their economic problems 2-3 years behind the progress being made here in the US.
We decided to use the DFE for several reasons. First we wanted a fund whose holdings earned the majority of their revenue in Europe. Smaller companies accomplish this goal. Secondly we did not want to invest in any single country.
To our knowledge DFE is one of the few ETFs that fulfills this goal. Lastly, we wanted to use Wisdom Tree’s product as this is a somewhat income oriented account. I believe that Wisdom Tree’s ETFs seek out those companies with secure and growing dividend streams.
In my opinion, those reasons still pass the validity test. Although I continue to consider the southern European countries weak sisters in the global economy, I’m not worried about the DFE as most of its investments are in the northern European countries.
In addition, I am pleased with the ETF’s continuing performance in the current weak equity markets. I plan to continue holding the position until the investment thesis changes.
DISCLAIMER: The investments discussed are held in client accounts as of January 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Dividends reflect past performance and there is no guarantee they will continue to be paid. Past performance is no guarantee of future results.
