Recent concerns with the Portuguese economy have highlighted the work that still needs to be done in Europe. Much uncertainty still plagues the continent. However, as investors fixate on the PIIGS nations within Europe and their ongoing debt struggle, many bright spots are being ignored. Both Germany and Switzerland get high marks for their export driven economies and funds such as the iShares MSCI Switzerland Index (NYSE:EWL) have become popular destinations to add exposure to the countries. However, other opportunities do exist in Europe and one may offer some of the best returns around.
IN PICTURES: 10 Reasons To Add ETFs To Your Portfolio

An Emerging Star
An economic powerhouse is right under the noses of most investors. Poland was the only European Union member not to fall into recession in 2009. Its economic growth rate in 2009 was the highest out of any of the OECD's 34 members. In 2010, the nation saw its economy grow by 3.7 percent. Poland's expansion has been fueled by its independent floating currency, the zloty. Its currency has fallen about 18% against the euro since early 2009. This has kept Polish exports competitive in the global marketplace and has helped insulate the nation from the effects of the Euro debt crisis. Analysts at the World Bank predict that Poland will finish 2011 with 4.1% GDP growth and 2012 with 4.5 percent. (To learn more about the Euro, see When and why did the euro make its debut as a currency?)

The nation also features favorable debt conditions. Public debt at the end of 2010, reached 53% of GDP. This compares positively with 77% for Germany, 62% in the UK & the nearly 94% for the United States. Corporate debt is low and average Tier 1 bank ratios in Poland are 11%-12% compared to less than 8% in Western Europe.

Playing Europe Through Poland
Additionally, Poland is a back-door play on the strongest in the Euro monetary union. Nearly 25% of Poland's exported goods are sold to Germany. Germany's finished products, which are popular around the world, are often made with components supplied from Poland. The nation is also viewed as a source of cheaper labor in Europe, with a wide range of companies such as ABB Limited (NYSE:ABB) and Dell (Nasdaq:DELL) setting up shop in the country.

Poland has also benefited from increasing domestic demand. Generous tax cuts and substantial infrastructure spending are helping spur this growth. Commercial property prices in the nation's capital of Warsaw are rising about 10% annually and foreign direct investment grew by 28% in 2010.

Adding Exposure
For investors looking to add exposure to Polish companies, there are only a few that trade on U.S exchanges, such as spirit producer/distributor Central European Distribution (Nasdaq:CEDC). However, opportunities do exist in the exchange traded fund sector.

In just under a year, Poland went from having zero ETFs that tracked the nation to having two. The Market Vectors Poland ETF (Nasdaq:PLND) and the iShares MSCI Poland Index (Nasdaq:EPOL) both provide access to Eastern European nation. However, long term investors may want to go with the iShares fund. The ETF tracks more than double the amount of holdings of the Market Vectors fund and also has a lower expense ratio of 0.61%. Both funds have financials as a top weighting with over 40% of EPOL in that sector.

For investors wanting to add all of Eastern Europe to a portfolio, both the iShares MSCI Emerging Markets Eastern Europe (NYSE:ESR) and SPDR S&P Emerging Europe (NYSE:GUR) include Poland as their second largest nation weighting, behind Russia.

Bottom Line
While much of Europe is still mired in crisis, Poland stands out as a prospect for portfolios. Its strong current growth prospects and good outlook makes the nation an ideal candidate for a portfolio weighting. Longer term investors may want to add the nation either through one of its single country exchange traded funds or through the Guggenheim Frontier Markets ETF(NYSE:FRN).

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  9. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center