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Look for diversified portfolios in European ETFs: Analyst

European ETF red flags: Pro

When investing in European ETFs, one analyst recommends looking into products with diversified portfolios.

Todd Rosenbluth, S&P Capital IQ's director of ETF and mutual fund research, told CNBC's "Power Lunch " on Monday that the popular European ETF, Wisdom Tree Europe Hedged Equity Fund, may not be a smart investment move.

"When we look at the hedge product from Wisdom Tree, we think the stocks inside are overvalued," he said. "It's heavily laden with consumer staples companies that are seeing slow growth, slower growth than they have seen historically, and the costs are hurting them as the dollar strengthens."

Rosenbluth specifically mentioned Anheuser-Busch InBev.

Philippe Huguen | AFP | Getty Images

Rosenbluth didn't write off European ETFs altogether, but he does want investors to look at the individual stocks within a fund to make sure they aren't overvalued.

As Europe becomes cheaper due to a weakening euro, Rosenbluth suggests investors look at funds that are diversified across sectors and stocks. That could help soften the blow of a strengthening dollar.

He was very positive on the iShares Currency Hedged MSCI EMU ETF as a European investing play. "We think the stocks inside are ... attractively valued," he said.

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