Carl Delfeld is head of the global advisory firm Chartwell Partners and editor of Chartwell Advisor . He served as a director on the executive board of the Asian Development Bank during the administration of President George H. W. Bush, and he is the author of The New Global Investor . Click here for more analysis from Delfeld, or to subscribe to Chartwell Advisor. click here.
Overview and Rationale
As an affluent, high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards.
Canada is largely a resource-based economy but its service side provides good balance. It offers investors fiscal strength, low political risk, and a resilient economy.
Industrial Materials (15.6%) and Energy (26.3%) sectors account for 42% of EWC, with such main players in industry such as Canadian Natural Resources (CNQ), Encana Corp. (ECA) and Suncor Energy Inc. (SU). But the financial sector is the largest group in EWC, at 35%. These banks are in relatively good shape compared to US large banks.
Canada and EWC are also a limited play on gold mining companies with two of North America’s largest, Barrick Gold (ABX) and Goldcorp Inc (GG). Canada and EWC thus offer a low-risk way to add energy and commodity diversification to your global portfolio.
EWC offers a nice yield just under 3% and also provides a nice hedge on the U.S. Dollar. Though recently strong, the greenback may reverse course as global markets concern over the Fed printing press and inflationary pressures returns.
Canada, on the other hand, is in a strong fiscal position and actually has a current budget surplus.
Catalyst: The Canadian market and EWC will likely do very well if and when energy and commodity prices rebound from their sharp selloff.
Valuation
EWC is trading at a five-year low and lost about 10% of its value just this week. I can’t tell you where the bottom is but believe the risk/reward relationship is favorable for investors. The Canadian market is trading at about a 10% discount to the S&P 500 on a price to earnings basis.
Risk Factor
Moderate – Low given the depressed state of energy & commodity prices.
Risk Management
Suggest an 8% trailing stop loss.
Tip: You may wish to scale into a position in EWC rather than jump in with both feet.
ETF Pick of the Week – iShares MSCI Canada (EWC) 1/16/09
Carl Delfeld
Carl Delfeld is head of the global advisory firm Chartwell Partners and editor of Chartwell Advisor . He served as a director on the executive board of the Asian Development Bank during the administration of President George H. W. Bush, and he is the author of The New Global Investor . Click here for more analysis from Delfeld, or to subscribe to Chartwell Advisor. click here.
Overview and Rationale
As an affluent, high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards.
Canada is largely a resource-based economy but its service side provides good balance. It offers investors fiscal strength, low political risk, and a resilient economy.
Industrial Materials (15.6%) and Energy (26.3%) sectors account for 42% of EWC, with such main players in industry such as Canadian Natural Resources (CNQ), Encana Corp. (ECA) and Suncor Energy Inc. (SU). But the financial sector is the largest group in EWC, at 35%. These banks are in relatively good shape compared to US large banks.
Canada and EWC are also a limited play on gold mining companies with two of North America’s largest, Barrick Gold (ABX) and Goldcorp Inc (GG). Canada and EWC thus offer a low-risk way to add energy and commodity diversification to your global portfolio.
EWC offers a nice yield just under 3% and also provides a nice hedge on the U.S. Dollar. Though recently strong, the greenback may reverse course as global markets concern over the Fed printing press and inflationary pressures returns.
Canada, on the other hand, is in a strong fiscal position and actually has a current budget surplus.
Catalyst: The Canadian market and EWC will likely do very well if and when energy and commodity prices rebound from their sharp selloff.
Valuation
EWC is trading at a five-year low and lost about 10% of its value just this week. I can’t tell you where the bottom is but believe the risk/reward relationship is favorable for investors. The Canadian market is trading at about a 10% discount to the S&P 500 on a price to earnings basis.
Risk Factor
Moderate – Low given the depressed state of energy & commodity prices.
Risk Management
Suggest an 8% trailing stop loss.
Tip: You may wish to scale into a position in EWC rather than jump in with both feet.