Playing Canada’s Natural Resources With These ETFs (ENY, VSS, CNDA, EWC, SU, RY, ABX, CNQ, PAAS, IMO, CVE)
As global demand for natural resources remains insatiable, Canada’s vast supply of these natural resources makes it highly appealing to investors.
The democratically governed nation, just north of our border, boasts the world’s second largest oil reserve, trailing none other than Saudi Arabia, has a vast supply of natural gas and generates a decent amount of nuclear energy, enabling the nation to be a net exporter of energy. Furthermore, Canada is the world’s largest producer of zinc and uranium, as well as a positive producer of gold, nickel, aluminum and lead, all commodities that fast-growing nations in Asia and Latin America are thirsty for. In fact, according to a recent Barron’s article, Export Development Canada, a government agency that provides credit to Canadian exporters, forecasts 57% growth in Canadian exports to Asian-Pacific countries and lesser-but-strong growth to other emerging markets in 2011.
In addition to be rich in energy and metals, the maple-leaf nation is an exporter of grains and agricultural minerals. In fact, Canada is amongst the world’s largest producers and exporters of wheat, canola, fertilizer and potash, which has aided in the World Economic Forum to rank the nation 10th of 139 countries in global competitiveness.
As for the near term future of Canada, the outlook remains rosy as the International Monetary Fund anticipates GDP growth of nearly 3 percent and the nation has formed solid relationships with energy hungry nations which could further boost Canadian exports and GDP in 2011.
The easiest way to play Canada is through the following ETFs:
- iShares MSCI Canada Index (NYSE:EWC), which includes holdings such as Royal Bank of Canada (NYSE:RY), Suncor Energy (NYSE:SU), Barrick Gold Corp. (NYSE:ABX) and Canadian Natural Resources Ltd. (NYSE:CNQ). EWC is relatively sector-specific allocating nearly 31% of its assets to financials, 27% to energy and 23% to materials.
- IQ Canada Small Cap ETF (NYSE:CNDA), which seeks to track a diversified basket of small-cap Canadian companies. Top holdings include Inmet Mining Corp., Pan American Silver (NYSE:PAAS) and Equinox Minerals. In regards to sector allocation, CNDA allocates nearly 55.4% of its assets to materials, 18.4% to energy and 8.5% to industrials.
- Vanguard FTSE All-Wld ex-US SmCp Idx ETF (NYSE:VSS), which is a highly diversified play on developed international markers and allocates nearly 14% of its assets to Canada, which is VSS’ highest country allocation.
- Guggenheim Canadian Energy Income (NYSE:ENY), which is a specific play on the Canadian energy sector. Top holdings include Canadian Oil Sands Ltd., Imperial Oil (NYSE:IMO) and Cenovus Energy (NYSE:CVE).
Written By Kevin Grewal From ETF Tutor Disclosure: No Positions
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.