Canadian Exchange Traded Funds (ETFS) and Stock Sectors - March 27, 2008
This article provides a list of available Canadian Exchange Traded Funds (ETFs). It
also provides the fundaments (P/E ratio and dividend yield) and the Management
Expense Ratio (MER) of each ETF. Most of these Canadian ETFs are based on various
segments of the TSX market. The article also provides the fundamentals on those
TSX market segments for
which no ETF is available.
See also our article on selected global ETFs.
With this information, investors can make a judgment
as to the desirability of various segments of the Canadian market and provides
the trading symbol under which each can be purchased. (Or sold short for that
matter).
This can help you decide if the which sectors are most (or
least) attractive. (Financial, Energy, Real Estate etc.). For those sectors with
an ETF available, you can then easily buy that sector by buying the ETF.
While it can be very difficult to interpret whether a particular P/E ratio is
attractive or not, it is useful to be aware of these ratios. Note that most of
the indexes are "capped" which means that the contribution of any one company to
the index is capped or limited to a certain level. In theory the P/E ratio of an
index should be more meaningful than the P/E for an individual stock since the
group of companies that make up an index are less prone to unusual gains and
losses since these tend to average out. But in some cases they do not average
out and an index P/E could be affected by large unusual gains or losses at
individual companies or something unusual that is affecting the entire sector.
Note that the sectors contain corporations as well as Income Trusts, the
inclusion of Trusts has driven the dividend yields higher.
Also note that some of these sectors contain less than 10 companies which is
really not enough to be representative of a sector.
Where there is no ETF, you cannot buy the index and would need to pick and
choose individual stocks or find a mutual fund that focuses on the sector. You
can find the individual companies in each sector at the
TSX web site.
The ETF's that start with "X" are from from
www.ishares.ca The ETF's that start with "H" are by Horizon beta pro and are
either a two times bullish bet on the segment or a two times bear bet against the
segment. Use caution and see
http://www.hbpfunds.com/
In buying or selling any of these ETFs be cautious about the trading volume
and the bid/ask spread. Higher volume ETFs are preferred, all else being equal.
In buying any of these, be careful to double check the trading symbol with
other sources. I believe the symbols below are correct, but please double check.
A wrong symbol could lead to to the wrong investment.
| TSX Segment Index |
Trailing P/E |
Dividend Yield % |
Canadian ETF Stock Symbol |
Comment |
| S&P/TSX Composite index |
17.7 |
2.50 |
XIC (0.25% MER) |
Appears reasonably valued, but
not cheap and we should
keep in mind the heavy weighting to Energy and financials can make this
index quite volatile. Profits can change quickly. |
| S&P/TSX equity Index (Composite without Income Trusts) |
17.0 |
1.79 |
No ETF |
Same comment as above applies |
| S&P/TSX Income Trust Index |
28.1 |
8.8 |
XTR (0.55% MER) |
The yield seems very attractive. The very high P/E is
not attractive. Also when taxation hits in 2011, yields and earnings are
likely to fall, perhaps substantially. |
| S&P/TSX 60 (Large Cap) Index |
17.0 |
2.20 |
XIU (0.17% MER) HXU (1.15% MER) 2 times bull
HXD (1.15% MER) 2 times bear |
Same comment as for composite index above. |
| S&P/TSX Mid and Small Cap Index (Completion
Index) |
20.9 |
3.56 |
XMD (0.55% MER) |
Yield is reasonable due to Trusts in the
mix, but overall this looks unattractive. |
| S&P/TSX Small Cap Index |
97.6 |
3.91 |
XCS (0.55% MER) |
Yikes! possibly several large losers are
driving the P/E up. Not attractive. |
| S&P/TSX Capped Consumer Discretionary Index |
13.9 |
3.14 |
No ETF |
There are only 20 companies in the index, some
are poor fits. Seems like a meaningless sector. |
| S&P/TSX Capped Consumer Staples Index |
19.4 |
1.86 |
No ETF |
Only 13 companies mostly retail. Not
particularly attractive. |
| S&P/TSX Capped Metals & Mining Index |
22.6 |
1.12 |
No ETF |
17 companies. This sector looks expensive attractive
and
keep in mind the sector can be cyclical and we may be at an earnings peak. |
| S&P/TSX Capped Energy Index |
16.6 |
2.59 |
XEG (0.55% MER) HEU (1.15% MER) 2 times bull
HED (1.15% MER) 2 times bear |
65 companies. looks attractive but will be
volatile with energy prices. |
| S&P/TSX Capped Financials Index |
14.0 |
3.69 |
XFN (0.55% MER) HFU (1.15% MER) 2 times bull
HFD (1.15% MER) 2 times bear |
28 companies dominated by the big banks and life
insurance companies. Looks attractive. But
currently the sector faces the "credit crunch". |
| S&P/TSX Global Gold Index |
n.a. |
0.94 |
XGD (0.55% MER) HGU (1.15% MER) 2 times bull
HGD (1.15% MER) 2 times bear |
37 Global gold companies. My experience has
been that gold companies tend to be often over-priced due to a "lottery ticket"
mentality. |
| ISHARES COMEX Gold Trust |
n.a. |
n.a. |
IGT (.40% MER) This is the American MER,
possibly it is higher in Canada. |
This is gold itself as a commodity. This is a
U.S. gold ETF that also happens to trade on the TSX in Canadian dollars. If
you are interested in betting on GOLD it makes sense to buy the commodity
rather than gold companies. |
| S&P/TSX Capped Health Care Index |
13.5 |
4.16 |
No ETF |
With 4 companies, it is a joke to call this a
segment. But clearly some of the 4 individual companies have attractive P/E
ratios. |
| S&P/TSX Capped Industrials Index |
15.3 |
1.86 |
No ETF |
20 companies many of which are not all that
"industrial". Overall looks moderately attractive in price. |
| S&P/TSX Capped Information technology Index |
n.a. |
0.63 |
XIT (0.55% MER) |
Appears unattractive - only 8 companies in
this so-called "index" |
| S&P/TSX Capped Materials Index |
30.1 |
0.69 |
XMA (0.55% MER) |
56 companies, does not look attractive although
earnings here could continue to rise rapidly if commodity prices continue to
rise |
| S&P/TSX Capped Real Estate Index |
51.3 |
4.54 |
XRE (0.55% MER) |
Real Estate has a habit of looking very
expensive on an earnings basis. I would be leery at this time. |
| S&P/TSX Capped Telecommunications Index |
12.2 |
4.50 |
No ETF |
Only 5 companies but gives a good exposure to
the big telcos. Reasonably priced. But there is no ETF... |
| S&P/TSX Capped Utilities Index |
18.8 |
3.97 |
No ETF |
Only 10 companies. While the dividend is
attractive, the sector overall does not seem particularly attractive |
| S&P/TSX Capped Energy Trust Index |
31.4 |
9.75 |
No ETF |
The yield looks very attractive but the P/E is
unattractively very high.
And faces the issue of taxation in 2011 |
| S&P/TSX Capped REIT Index |
116.2 |
6.64 |
No ETF |
Same comments as for Real Estate Index above. |
| Dow Jones Canada Select Dividend Yield Index |
12.63 |
4.22 |
XDV(0.50% MER) |
Appears reasonably attractive. 30 companies in
the ETF. Keep in mind their is a heavy exposure to the big bank stocks which
have had troubles of late |
| Dow Jones Canada Select Growth Index |
25.9 |
0.62 |
XCG (0.50% MER) |
P/E and yield are from Dow Jones Canada large
cap growth index. Appears expensive |
| Dow Jones Canada Select Value Index |
14.2 |
2.76 |
XCV (0.50% MER) |
P/E and yield are from Dow Jones Canada large
cap value index. Appears attractive although growth might be too slow |
| Claymore Canada Fundamental Index |
n.a. |
2.71 |
CRQ (0.65% MER) |
This is meant to be a value portfolio as
it chooses stocks on the basis of higher dividend, lower price to book,
higher free cash flow and lower price to sales. I am unable to locate a P/E
ratio. |
Investors may wish to
consider the expected growth or contraction of the earnings that are driving the
P/E for a particular segment. High growth can justify a high P/E and low or
negative growth leads to lower P/E ratios. Also for some industries like mining
and real estate, the GAAP earnings may arguably understate sustainable
free cash
flow therefore justifying a higher P/E. For more on this see our articles on
understanding P/E ratios. Possibly,
some segments, which may not have a lot of companies in the sector,
are affected by one or two companies within the sector having unusual losses.
My own strategy is to evaluate individual companies rather than segments.
Our individual Stock Picks, which have an outstanding long-term track record, are
available on a Subscription basis.
For those segments that show an entry in the Canadian "ETF" column, this means that an
Exchange Traded Fund is available. These ETFs trade just like stocks and the
trading symbol is provided. Buying the ETF gives convenient exposure to the
segment.
Where an ETF exists, you buy it just like buying a stock.
To see a chart of the past performance of any of the ETFs enter the symbol
below in the format XTR.TO and click, there are options there to show you up to
a five
year chart.
Additional Data
The P/E ratio and dividend yield information for many of the above sectors
was found at on the TSX WebSite, See:
http://www.tsx.com/HttpController?GetPage=MDFIndicesView&Selected
Tab=QuoteResults&Exchange=T&IndexID=0000&OpenIndex=&Market=T&Language
At the the above link, you can see additional information including the
particular Constituent Companies included in each index.
For more
information on all of the above ETFs that start with "X" go to
www.ishares.ca there you can see the weights of individual companies in each
ETF. For information on the Dow Jones indexes see
http://www.djindexes.com/mdsidx/index.cfm?event=showStyleCAPerfStats
and
http://www.djindexes.com/mdsidx/?event=showSelectDivStats
For information on the ETF symbols that start with "H" go to
http://www.hbpfunds.com/
For the Claymore Canada Fundamental index go
http://www.claymoreinvestments.ca/
END
Shawn Allen, CFA, CMA, MBA, P.Eng.
President, InvestorsFriend Inc.
June 1, 2008
www.investorsfriend.com