Major Wall Street firm sees a breakout in luxury stocks — and lists three reasons why ETFs are a great way to play it

As luxury stocks make waves overseas, State Street Global Advisors believes investors should consider European ETFs if they want to capture the gains from their outperformance.

Matt Bartolini, the firm’s head of SPDR Americas research, finds three reasons why the backdrop is becoming particularly attractive. First and second on his list: valuations and earnings upgrades.

“That’s completely different than what we saw for U.S. firms,” he told CNBC’s Bob Pisani on “ETF Edge” this week.

His remarks come as LVMH became the first European company to surpass $500 billion in market value earlier this week.

Bartolini lists price momentum as a third driver of the investor shift.

His SPDR Euro Stoxx 50 ETF (FEZ) is considered a broad European ETF. The ETF is up about 20% so far this year, with a price increase of nearly 1.2% since the beginning of January.

While the fund’s top holding is LVMH at 7.29%, according to the company’s website, Bartolini contends the shift applies beyond luxury stocks and to lower-end consumer stocks.

His firm’s website lists French cosmetics company L’Oreal — which is up almost 30% this year — as another one of his fund’s major holdings. It also shows FEZ allocating more than 20% to consumer discretionary — 2.5% higher than its second-most allocated industry.

“That’s on a broad-based level,” he said. “So, basically, buy Europe and sell U.S. has been some of the trade that we have seen.”

FEZ closed the week down 0.41% but ended the month up more than 3.1%.