Noted for their simplicity and other advantages over mutual funds, exchange-traded funds have become a popular investing tool. ETFs hold a collection of stocks that share certain elements, allowing investors to get in early on what they believe are tomorrow's big trends.

Investors who believe Canadian stocks present an opportunity today, for example, can turn to iShares MSCI Canada Index, which counts Suncor Energy (NYSE:SU) and Research In Motion (NASDAQ:RIMM) among its top holdings. But the broad diversity of many ETFs also limits your upside -- and investors may dilute stellar returns away from that one amazing company in the crowd.

Fear not, Fool. In this edition of "ETF Teardown," we'll use some nifty tools to drill into Canada's best investments. To help, we'll use Motley Fool CAPS, our tool for screening and ranking stocks and stock pickers.

The power of tags
To help investors quickly locate great stocks, the 5,400 stocks rated in CAPS can be "tagged" with descriptors that group the company with others sharing certain qualities -- "Fast Food," for example, or "Health Care."

Selecting the "Canada" tag in CAPS gives you a list of 63 Canadian investments that trade on American exchanges. This particular collection of investments has held up much better than the general market in the past year, falling only 21% versus an S&P loss of 42%.

Getting down to the nitty-gritty
Here are some highly rated Canadian stocks I've gleaned from CAPS today.


Rank (out of 5)


Cameco (NYSE:CCJ)


Metals & Mining

Petro Canada (NYSE:PCZ)






Gildan Activewear (NYSE:GIL)


Consumer Non-Durables

Interest in clean, efficient nuclear power could put Cameco and other nuclear producing companies like Denison Mines in improved positions as the public continues to further embrace alternative energy options. The plummeting price of uranium has sent the stock tumbling in the past three months. Its P/E has fallen to the bottom of its historical range, at 12.5, while the stock now trades below its net asset value.

But many CAPS members think nuclear power will see strong demand in the future. This would benefit both the price of uranium and stock in Cameco. More than 97% of CAPS members rating the company have voted it to outperform the general market.

Gildan Activewear
Retail's been an undoubtedly ugly place to be in the past year. But while cost-conscious parents may pass on purchasing a new pair of shoes for themselves, they may be less likely to eschew replacing their kid's holey hockey socks. While Gildan's shares are down more than 40% YTD, the company believes that the reduced manufacturing costs it's achieved through improved performance at its Dominican Republic plant, along with increased production in its Honduras facility, will help keep higher commodity prices from sapping the bottom line.

The company expects to also aid profitability by instituting price increases. Whether that approach pays off in the long run remains uncertain, but only 11 out of 228 CAPS members are bearish on Gildan -- the rest believe it will outpace the market going forward.

Petro-Canada sells everything from bagels to gas for Canadian consumers on the go. The company recently teamed up with Radiant Systems to help provide its customers with better and faster service at its retail locations through enhanced point-of-sale solutions.

On the supply side, Petro-Canada was one of five bidders, including ConcoPhillips (NYSE:COP), who won the right to develop oil and gas tracts in the National Petroleum Reserve of Alaska. With its fingers in both the gasoline and convenience-store sides of its industry, many investors see Petro-Canada poised for serious upside. Of the 596 CAPS members rating Petro-Canada, 583 believe the company will beat the market.

Despite some critics' opposition to more drilling, new equipment orders from Encanca keep flowing, adding substantially to the bottom line of manufacturers like Rowan. To better pursue potential resources, EnCana announced that it's splitting into two independent companies. Cenovus Energy will control its oil-sands and refining division, while Encana will remain a natural gas company. Meanwhile, U.S. demand for natural gas from Canada remains high, putting Encana in a lucrative position.  As such, 794 out of the 816 CAPS members rating EnCana think it will beat the market.

Lead a horse to water ...
Plucking individual stocks from any region is always a high-risk endeavor. Investors should perform their own due diligence on companies, rather than taking anyone else's recommendation. Even the best stock pickers can be horribly wrong.

Do you agree that there's value in Canada? Share your opinion with us at Motley Fool CAPS.

In the coming weeks, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. The service, which just launched, will rely heavily on proprietary CAPS "community intelligence" data to establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Dave Mock loves doing the teardown part -- it's the put-back-together part he hates. He owns no shares of companies mentioned here. The Fool's disclosure policy will sit on the porch swing and sip lemonade with you.