3 Intriguing Canada ETFs For Your Portfolio

By David Fabian, FMD Capital | April 28, 2014 AAA

NHL playoff hockey is in full swing and investors looking to capitalize on the birthplace of the sport may want to consider Canada ETFs for their portfolio.

Canada offers many attractive qualities for investors seeking exposure to North America, including plentiful natural resources, a sound economy, and welcoming business environment. Our neighbors to the north have a sound banking and financial system as well.

This plays to the strengths of investors looking to diversify their portfolio outside of the United States, but still access a developed and polished economy.

The iShares MSCI Canada ETF  (NYSE: EWC) is the largest and most heavily traded ETF that tracks 96 large-cap Canadian stocks and controls over $3 billion in total assets. The largest holdings in EWC include The Royal Bank of Canada and TD Toronto Dominion.

Based on those top holdings, it’s not surprising the largest sector allocation in this ETF is financials, with a 36.58 percent weighting. This is followed closely by energy stocks, which make up 26.10 percent of the fund.

The overweight exposure to energy and financials has helped push EWC to new all-time highs in 2014. So far this year, EWC has gained 2.47 percent and bested many of the domestic equity indices such as the SPDR S&P 500 ETF (NYSE: SPY).

Another intriguing Canadian investment offering to consider is the First Trust Canada AlphaDEX Fund II (NYSE: FCAN). This ETF is based on a weighted strategy that selects stocks based on their recent momentum, cash flow, book value, and other key balance sheet strengths.

The end result is a portfolio of 40 stocks that are spread between large, mid, and small-cap companies. Financial and energy companies also make up the top sector holdings in FCAN as well.

The last ETF that deserves to be mentioned in this segment is the Guggenheim Canadian Energy Income ETF (NYSE: ENY). This fund takes a slightly different tact by allocating its portfolio solely to high income producing energy companies. This includes several Canadian oil sands and energy exploration stocks that are focused on oil and natural gas services.

The current trailing 12-month yield on ENY is 4.25 percent and the fund has gained more than 8 percent in 2014 on the back of a strong commodity price surge. Further upside in oil and natural gas prices would likely bode well for this unique sector ETF.

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