Canadian Stocks: Make Money in Them the Easy Way

You can diversify your portfolio with sturdy Canadian stocks.

Feb 4, 2014 at 5:18PM

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some Canadian stocks to your portfolio but don't have the time or expertise to hand-pick a few, the iShares MSCI Canada ETF (NYSEMKT:EWC) could save you a lot of trouble. Instead of trying to figure out which Canadian stocks will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF, focused on Canadian stocks, sports a relatively low expense ratio -- an annual fee -- of 0.51%.

This Canadian-stocks ETF has lagged its benchmark by a bit over the past five and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year, and the future does count more than the past. Investors with conviction need to wait for their holdings to deliver.

Why Canadian stocks?
It's smart to have a geographically diversified stock portfolio, and this ETF easily gives you exposure to a range of Canadian stocks. You can invest in the ETF itself, or you might just scan its holdings for investment ideas. Canada is the world's second-largest country, after Russia, in terms of square miles, and it's rich in natural resources -- it's the top source of many. It boasts a solid banking system and ample regulatory oversight, too.

More than a handful of Canadian stocks saw poor or lackluster performances over the past year, with some low prices offering attractive entry points for investors. Teck Resources Ltd. (NYSE:TCK), for example, sank 33% and yields 3.5%. The miner has been challenged by falling prices for metallurgical coal, which has been shrinking its profit margins. Teck is realizing some significant cost savings simply by having its workers not leave truck engines idling. It's also investing in mining oil from Canadian oil sands, which might deliver future profits.

Fertilizer giant Potash Corporation (NYSE:POT) dropped 24%, in part due to an oversupply in the market and the breakup of a key Russian cartel (now seemingly repaired). PotashCorp is yielding 4.8%, and its dividend has been increased aggressively over the past few years. The company's last quarter wasn't strong (because of "pricing headwinds," among other factors), and while its long-term promise is intact, short-term concerns remain, such as falling margins. Demand from China is a plus, though, and some see the low-cost producer as having fallen enough to now be attractively priced. Indeed, TD Securities recently upgraded the stock to a buy.

Other Canadian stocks didn't do quite as poorly over the last year, but they could see their fortunes change in years to come. Suncor Energy (NYSE:SU) gave up 3%, yields 2.3%, and has been increasing its dividend aggressively -- though it's also paying out more of its free cash flow than some would like to see. Canada's largest energy company, Suncor, has been shifting its focus from low-priced natural gas to more profitable oil and is also investing significantly in renewable energies. Its integrated business model is boosting the profitability of its oil sands production, but it may be somewhat hurt if some sizable proposed pipelines aren't built.

Encana Corporation (NYSE:ECA) also shed 3% and yields 1.6%. The Canadian natural-gas giant has been busy cutting costs -- by reducing its workforce and shrinking its dividend by 65%, among other things. It's also looking into selling off its billion-dollar Deep Panuke gas project. Encana plans to focus on five key areas, including the Gulf Coast's promising Tuscaloosa Marine Shale region.

The big picture
If you're interested in adding some Canadian stocks to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

The No. 1 Way to Lose Your Wealth Without Even Knowing It
You’ve fought hard to build wealth for you and your family. Yet one all-too-common pitfall could completely derail your dreams before you even know it. That's why a company The Economist hails as "an ethical oasis" has isolated five simple questions you must answer to ensure that your financial future is really secure.

Can you answer YES to all five of these eye-opening questions?
Click here to find out -- before it’s too late!

Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers